This past spring the big-time world of student loans was rocked to its foundations when it was discovered that several financial aid officials were in the back pockets of some student loan lenders. The heyday of “you scratch my back and I’ll scratch yours” is over as far as preferred lender lists at colleges go. One bad apple…. But are lenders the real enemy?

Sunshine Act—Push for More Federal Loans That Just Aren’t There

Now colleges and universities that favored a single lender will be expected to offer students optional lenders, no more playing favorites. The Student Loan Sunshine Act was spearheaded by Senator Ted Kennedy as a way to show the government’s support for students battling with college finances. And the Sunshine Act is also an attempt to undercut the need to resort to private or alternative student loans.

Kennedy is not alone in his concern that there is an alarming trend toward private loans, possibly impelled by overly aggressive marketing tactics. He would prefer to see borrowers really exhaust all their federal loan options first. Of course, private student loan lenders are selling a product; that some actually need.

Their message: you CAN qualify for additional loans and completely cover the cost of your tuition, and maybe even get approved for money to cover those extra sundry expenses you were concerned about, too. If not my bank, then who?

The Hand That Feeds

College tuition costs have not stopped rising. One could argue that a college education is one big commoditized package that colleges, banks, and the federal government all want in on. But messages are mixed. As much as we want to browbeat lenders, plenty of them sell their warm and soft side—the helpful account managers that make the annual rounds of high school campuses offering one-on-one assistance for a confused herd of parents and students with half-completed FAFSA applications.

We are not conditioned to think that people who help us are bad. Are private lenders bad to try and make college possible? Are colleges and universities out of control with their costs? Why is everyone else making so much money and Americans being strapped so beyond their financial limits? From what other sources could a large quantity of money come, some nationwide bake sale?

How the Confused Can Go Wrong

In an article in USA Today a college graduate reportedly said that his foray into student loans was one big ignorant blunder. He argues that some student borrowers and uninformed parents are so confused by the student loan milieu that it’s easy to be sold on costly private loans well before you’ve really plumbed the depths of the ridiculously convoluted federal loan system.

Desirable Colleges Simply Cost a Fortune

Alternatively plenty of arguments are made for more affordable college options, such as state schools and community colleges. This is all well and good for students with no prejudice for a particular program, but for some students certain private colleges and universities provide a desirable field of study, a necessary reputation that costs money and lots of it. In cases like these, with the exception of the very wealthy, it’s likely that students will not qualify for nearly enough federal aid to cover the cost and will resort to private loans. Here are the real stories of alarming student loan debt.

So in the end, who’s really to blame? Is there a student loan life cycle here that at some point will naturally correct itself?

Some questionable sources look for the easy way around getting a degree. Some questionable sources fill that market demand with degrees from online degree mills. Who knew that was a billion dollar industry or that terrorists have got fake degrees? Worse yet, some high level members of the government also bought into these schemes, which undermine the value of a real education AND the safety of our country.