Lasell College, a 1300-student school in Newton, Massachusetts, has agreed to pay almost $200,000 to students for its own role in pushing improper student loans. According to an article by Todd Wallack in the Boston Globe:

Lasell College agreed to pay more than $191,000 to students to settle allegations it steered student loan applicants to Citizens Bank after the lender showered the school’s financial aid officers with free trips to sunny resorts and other gifts.

It was the second such settlement that Massachusetts Attorney General Martha Coakley has reached with a local college, part of a wave of actions by government agencies against schools across the country over their cozy relations with student loan lenders. Coakley accused the Newton private college of falsely telling students they were required to borrow from Citizens, even though other lenders offered cheaper loans. Lasell employees secretly received free entertainment, meals, and other gifts between 2003 and 2007.

While the Lasell situation is particularly egregious, it highlights a common problem in the student loan industry. New college students don’t generally know much about student loans. So if they need more money, naturally they’re going to go to the financial aid office. And the financial aid office will provide students with the college’s list of preferred lenders.

But why, exactly, does the college prefer those lenders?

Students might assume that the school prefers certain banks because these banks offer the best loans at the best terms for the student. This is often the case. But there are no uniform criteria for this sort of thing and colleges can make a lender preferred for whatever reasons it wants. [Image via]

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Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer