Why your student loan check was late.

American college student:


I know why your student loan check was late this semester.

You, and most of the students at your university, applied for student loans this semester. You needed the check in order to buy textbooks and pay for your dorm and tuition.

The university told you that your check would be held for two weeks, until they could verify that you had registered for classes, and are actually attending them; and that only then could they issue your student loan check. In they mean time, if you complained, they probably offered you a "short-term loan" for a $25 or $50 fee, to be taken out of your student loan check, when it arrives.

Where was your student loan money for the two weeks (or more) between the time your lender "released the funds," and the time the university credited your account or wrote a check?

Well, the university was playing in the markets with your money.

Their accountants told the government that they would hold your money in a sequestered account, or convert it to bonds, until it "could be released to the student." which is code for arbing the prime rate change by the FED meeting this month.

It's also pure crap. YOU are the borrower of record, NOT the university. They held the money for 9 to 14 days, and their books probably even show that they money "was in an account" the whole time, merely "hedged."

What their books DON'T show is that, because of the extra money in the account, their bank allowed them to hypothecate the money until the checks were cut. In other words, so they could speculate on your dime.

If you asked the university, they'd tell you that "it takes time to cut 5,000 student loan checks, and verify each one." Which is crap. They didn't spend two weeks mailing checks. They played the markets until markets closed on the weekend, and mailed every check, or credited every account, in one fell swoop.

Their whole rationale, that "they have to verify your student status," is pure D crap. YOU are the borrower of record. NOT THEM. But you are also a student, who is living in a city away from your residence, maybe even out of state. So statistically, you're not a voter. And your state government is not about to intervene, since many of your politicians sit on the board of regents of your university, or at least play golf with them.


I started noticing this when working with some colleagues to quantify the extra liquidity in the markets this fall. Someone else actually pointed me in the direction of seasonal student loan disbursements. I originally thought the person was claiming that students were playing the market. But I quickly saw that it was institutional; I talked to several college students I know, and the timing perfectly matches up with the liquidity in the debt, currency, and oil markets recently.

I asked one of the students to phone the bursar's office of their school, and the person at the desk pretty much verified this. A banking official from a nationwide california based bank also corroborated this theory.

Think about it. If your college has 10,000 students, and each of them takes out a $2,250 student loan, that equals twenty two point five million dollars that the institution has in its pocket for two weeks. now figure four thousand colleges and universities across the U.S., and you see how rush week can affect the national economy. (Or you could estimate that 80% of the 16 million U.S. college students will take out an average $2,250 loan this term, and you end up with 28.8 billion dollars every semester.)

So, if your student loan check was late, this was because the university bet on the wrong side of its equation, and needed "a couple of days" to produce your money.

It may not be illegal, but it is unethical as hell for them to hypothecate with money you borrowed, and are paying interest on.

.


[edit on 25-9-2007 by dr_strangecraft]

ummmmmmmmmmmmmmm this is pointless kinda isn't it? It's not really conspiracy but just underground marketing. Do you have any actual links or proof? Maybe they just had a glitch in their computers or somethign? Not all universities do business the same way. You generally get your loan checks from loan companies anyways and they send their checks to the university, not from the university directly. At least that's how Penn State does it. And you DO have to complete your registration by going onto the PSU site that controls admissions and all and log into your account and click to verify that you are going to the school, it's not all automatic.

Makes sense to me. I never had an issue with my student loan checks being late until I transfered to a different college. The first school I went to would send you your loan check within two weeks of classes starting, the school I'm going to now splits your check into two disbursements and holds them for up to a month before finally sending it to you. The first school also had a higher student count than the one I'm attending now, so it's not just a matter of it taking time to verify I'm going to class and mailing out the check.

Originally posted by PennKen2009
ummmmmmmmmmmmmmm this is pointless kinda isn't it? It's not really conspiracy but just underground marketing.

It's also immoral as hell, using someone else's property as collateral so you can speculate (and possibly lose) in financial markets.

Do you have any actual links or proof?

Not that I'm willing to ruin my career for, by posting here. I'm hoping students with this issue will call their universities, and corroborate for themselves, whether the money is in an escrow-type sequestered account, or is merely put in the general fund.

Maybe they just had a glitch in their computers or somethign? Not all universities do business the same way.

I'm saying they are doing it on purpose; that if you call financial aid, they will tell you it is university policy

You generally get your loan checks from loan companies anyways and they send their checks to the university, not from the university directly.

I think a guaranteed direct student loan is disbursed to universities by the government. THIS is what I'm talking about, not private loans.

I'm saying that some universities are holding onto student's funds SOLELY for the purpose of "hedging." An person I work with who is a grad student told me that their school pressures donors to have the university disperse even private scholarships, for the same reason--so they can speculate in the markets for a few weeks at the start of every term.

Very interesting.

It would be great if some of the university students here could corroborate some of this (hint... hint...).

Unethical? Yes.

So is just about everything else to do with making money without doing any actual work.
.

This is serious stuff. I'm kind of afraid to tell my fellow students about this for fear of getting blacklisted . I really want to get through college .

Could anyone provide me with an article about this unethical practice ?

[edit on 27-9-2007 by deadjed]

I called my college to ask them about this. When I asked for financial aid, the woman who answered the phone asked if she could try to help so I asked her about it. I explained to her that my loan checks keep getting divided into two separate disbursements rather than one and that it took a month to get my first one and asked her why it would have taken so long. She said she wasn't sure and asked for my info to get into my account, which I gave her.

She looked at my student account and said she couldn't see any reason why they would have held it that long, but that they do have to verify I'm going to class. I asked if they did it manually or if it was done through the computer system, she didn't know. I explained that my last name starts with a B so unless they are doing it manually starting with the end of the alphabet there is no logical reason for them to take a month to verify I'm attending my classes.

I then asked her, half jokingly, if the money we students get from loans was being used by the college to play the stock market or something before being sent to us. She said she wasn't sure and said she'd transfer me to financial aid. I sat on hold for 10 minutes before I gave up and hung up the phone.

I called them last week. Today I got the second half of my loan in the mail. It wasn't even scheduled to be released to the school until the 15th according to my loan account on the Sallie Mae website. So I'm thinking I hit some buttons for them to send me the money before they even get it from whoever gave me the loan to begin with.

Edited to say: I just looked at the date I originally posted because I called them the same day, so it only took 5 days for me to receive the second check. The money wasn't at the school when I called because I asked the woman I spoke to.

[edit on 1-10-2007 by Jenna]

Hm. Interesting.
Im not quite sure I complete understand what you are saying, but im trying. LOL

I have a student loan. I know way in advance what it will be - its based on income, etc etc.

I also know way in advance when it will be disbursed. It is never late. It always gets disbursed 2 weeks before classes start.

So right now, I know exactly how much my loan amount will be for Spring 08; however, it will not be disbursed until 1/15/08.

So is what you are saying that I SHOULD receive that money now, rather then 2 weeks before classes start?

Am I following you correctly?

Originally posted by greeneyedleo
Hm. Interesting.
Im not quite sure I complete understand what you are saying, but im trying. LOL

Basically, I'm saying that they (your college) gets the money from the feds before the semester starts (assuming it was a guaranteed direct student loan). I'm saying that the loaner will charge you INTEREST for those two weeks. But that they won't give you the money until later. Two weeks later, maybe longer depending on how they do in the market.


It's like taking a cab, and the meter starts running the second the driver stops for you. But somebody else uses the cab, maybe even goes for a ride, and you get stuck with the full meter rate.

I also know way in advance when it will be disbursed. It is never late. It always gets disbursed 2 weeks before classes start.

Good. Some college students are reporting that there money ISN'T disbursed as quickly or reliably. Smaller schools, and private schools, seem to disburse the money more reliably. State schools, from what I can see, tend to be much larger, and would have much more to gain by "using" the stu-loan money of many thousands of students for a two week period (or longer) every term.

So right now, I know exactly how much my loan amount will be for Spring 08; however, it will not be disbursed until 1/15/08.

So is what you are saying that I SHOULD receive that money now, rather then 2 weeks before classes start?

Am I following you correctly?

I'm saying you shouldn't owe interest on money you didn't receive. I'm saying that if the check is for "tuition and expenses," your school has a responsibility to get it to you before those bills are due---not hold your check, and force you to get a "temporary advance" at a high rate or fee, just to get money that is yours anyway.

I'm saying that they take money YOU will be responsible for, and they play the markets for two weeks because of all the money they hold until it is disbursed.

When I was in school, 20 years ago, GDSL money was disbursed on the same day as add/drop deadlines. You got the last of your loan money before the last day to withdraw without credit. You got the first installment before classes started, and before dorm rent was due.

It seems more and more common at many schools to hold that money, speculate with it, and force needy students to get a high-fee "advance" on the check the university is holding and playing craps with.

thats what I'm saying.

Thanks for answering my questions and this post.

I will look further into on my end!!