In a letter to the Department of Education, the SBPC exposes how Purdue University’s notorious “Back-A-Boiler” private student loan program puts students at risk and flagrantly violates the law. As the letter outlines, Purdue is clearly and actively breaching key consumer protections that ban schools from inappropriately vouching for student loan products, as well as statutes that mandate critical disclosures regarding schools’ relationships with private creditors. Purdue’s actions violate its Program Participation Agreement (“PPA”) with the Department, which is what allows the school to continue to receive Title IV funds such as federal student loans and Pell Grants.
For years, advocates have warned that Purdue University is engaged in a back-room deal aimed at driving borrowers toward expensive private student loans. Spearheaded by Purdue President Mitch Daniels and operated in partnership with the scandal-plagued financial services firm called Vemo Education, this scheme leverages students’ trust in their school to load them up with pricey, risky, and deceptively marketed debt in the form of so-called “Income Share Agreements.” At the back end, wealthy investors including hedge funds and high-net worth families have reaped windfall profits.
Purdue students have long been guinea pigs in an experiment that has lined Wall Street’s pockets and stoked Mitch Daniels’ ego while burying borrowers in unaffordable debt. It’s time for this racket to end. The Department must condition Purdue’s access to federal funds on the school’s abandonment of this risky and illegal lending scheme. The Department must also ensure that Purdue makes borrowers whole by canceling these unlawful loans.
Read the letter: Letter to Secretary of Education Miguel Cardona
In the news: Student loans: Mom slams Purdue ISA offering as son deals with nearly $100,000 in debt
More on the SBPC’s work related to Income Share Agreements is available here.