An investigation conducted by The Student has found evidence that the University of Edinburgh disadvantages US students by limiting which lenders they can use when taking out private educational loans.
A student was refused their choice of lender and needed to pay $10,000 out-of-pocket after their lender was not accepted by the University.
Their lender offered a private loan to residents of the student’s US state.
In an email seen by The Student from the student’s chosen lender, an associate stated that the loan: “is an acceptable loan for the school to accept”.
“The school cannot dictate to you where you can borrow a loan from to cover necessary costs”.
“I can assure you that we looked into the school and they’re eligible to certify and receive funds from [us]. If they choose not to, that’s up to them and unfortunately, directly affects you.”
The University’s scholarships and funding webpage lists only three “currently approved” lenders: Sallie Mae, Earnest Loans, and VSAC. The latter is available only to Vermont residents.
The option to use alternative lenders with more competitive interest rates is not mentioned on the University’s website.
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These costs come amid a student debt crisis in the US where national student debt totals $1.766 trillion and the average undergraduate borrows $32,637 to earn a bachelor’s degree. US student loan debt can also take from 20 to 45 years to pay off.
The University of Edinburgh’s international tuition fees have also been rising four per cent annually with US students currently paying between £24,000 and £35,000.
In an email sent to the same student, seen by The Student, the University’s funding team said: “we are unable to proceed with certifying this type of loan, as the University is not able to take any new loan lenders.
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“For a new loan lender to be added it would need to go through a lengthy procurement process and we do not currently have any plans to add any new lenders at this time.”
The Student investigated the legitimacy of these claims and found that other UK universities not only accept the aforementioned student’s lender but encourage students to shop around for loans that work best for them.
A spokesperson from St. Andrews told The Student that: “we do accept [the student’s chosen lender] along with the other sources of funding listed on our webpages.
“In terms of processing time, this wouldn’t be too long. We would receive a form on which we would certify the student details and we can email this back.”
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When asked why St. Andrews’ US loan policy was so flexible, the spokesperson stated:
“There is an opportunity-cost for US students to study outside of the US . . . [they] lose funding options in attending a foreign university. If we hear of alternative funding opportunities we will signpost these as a courtesy to [US students].”
St. Andrews’ funding page specifically states: “If a parent or student has worked with a lender not listed below, and has received excellent benefits and quality service, please recommend this lender to us.”
Various Russell Group institutions including the Universities of Oxford, Cambridge, and Durham all advertise on their websites that they are willing to accommodate to their students best interest concerning alternative US loans.
Other Scottish universities such as the Universities of Glasgow, Dundee and Aberdeen also indicate that they are willing to work with alternative US lenders.
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The University of Aberdeen’s press office told The Student that they will accept any US lender willing to work with foreign universities, stating:
“Private lenders offer loans with different requirements, fees, and interest rates so we want students to be able to have as many options as possible to allow them to attend higher education.”
On the time frame for processing new loans, they added “it can take a few weeks depending on the time of the year.”
A spokesperson from the University of Edinburgh told The Student that:
“The loan companies available to US students are the most commonly used lenders for US loans within the UK higher education sector.
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“We are open to considering other firms, however, any new procurement process could cause delays for students as we would need to ensure we are following due diligence.”
The University’s website does not mention alternative lenders as an option. However, a flowchart on the process for using US private loans states: “We are not currently taking applications to accept loans from new private loan lenders.”
Formal policy that was inclusive of alternative lenders was not specified by the University to The Student.
The lenders that the University does advertise have been subject to controversy in the past.
Sallie Mae is the largest private student loan provider in the US and has a history of deceptive lending practices. In 2007, the New York Attorney General Andrew Cuomo launched an investigation after private loan companies were found giving kickbacks to universities in exchange for endorsing their loans.
Cuomo said that about 90 per cent of students choose their lender from a list of preferred providers drawn up by universities.
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Sallie Mae was caught placing their staff in schools alongside financial aid administrators without telling students they were with Sallie Mae. They also funded trips for university officials to visit Sallie Mae processing centres, and set up call centres for universities.
In 2017, the Consumer Financial Protection Bureau sued Navient (formerly Sallie Mae), alleging gross mismanagement, deceiving students and borrowers, and depriving them of their legal rights.
Navient now owns Earnest Loans, the only other private lender available to all US students at the University of Edinburgh.
The University of Edinburgh did not respond when The Student asked if they wished to comment on the controversial history of its lender Sallie Mae.
Due to the University’s rejection of the student’s original lender, they were forced to take out federal US loans. These failed to cover the full cost of tuition, leaving $10,000 to be paid out-of-pocket.
In an updated statement from the University to The Student, a spokesperson added: “The University is actively discussing engaging with smaller lenders and will update our webpages following the completion of our review to ensure total clarity for students.”
Image via Rayna Carruthers