Pastors Indicted in $4 Million Student Loan Scheme

Student Loan Girl — Wed, 26 Nov 2008 23:19:00 GMT

The husband-and-wife pastors of a Houston church have been indicted in a student loan scheme in which the pastors and another church leader allegedly defrauded the government of millions of dollars in student loans, according to a news release from the U.S. Attorney General Office (“Leaders of ‘Fishers of Men’ Church Charged With Student Loan and FEMA Fraud,” Nov. 20, 2008).

Eric and Sheila Washington, then pastors of the Fishers of Men Worship Center, as well as church treasurer Tony Overstreet, are accused of filing 140 student loan applications totaling more than $4 million on behalf of church members over a two-year period. The church leaders say they intended to use the money to fund a new church building.

The Washingtons and Overstreet allegedly coaxed college-age church members into providing the church leaders with their personal identifying information. The three church leaders then used that information to apply for student loans in the church members’ names and provided the student loan lenders with the Washington’s address so the loan funds could be mailed directly to their home.

Students were typically allowed to keep $2,000 of the loans — which were generally in the amount of $25,000 or $30,000 — and were promised that Fishers of Men would repay the loans within six months, according to the indictment.

Non-Student Church Members Roped Into Scheme

The indictment further alleges that the Washingtons and Overstreet recruited Fishers of Men church members to falsify their paystub information in order to qualify as co-signers on the student loans.

Once the trio had acquired information from every eligible churchgoing student, the Washingtons and Overstreet allegedly found a new way to get student loan funds — by enrolling other church members in community colleges and then withdrawing the church members from classes as soon as the loans were funded.

Bank One funded over 90 student loan applications worth $2.75 million before the fraud was discovered. The Washingtons and Overstreet then used the same scheme with Wells Fargo, through which they submitted more than 50 applications for college loans totaling $1.5 million.

Eric Washington and Fishers of Men Secretary Felicha Williams are also charged with conspiring to defraud FEMA (Federal Emergency Management Agency) of funds related to a program that reimbursed shelters for housing Hurricane Katrina evacuees by overstating the number of evacuees the church temporarily housed.

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Banks Become More Selective, Leaving Some Colleges Without Student Loans

Student Loan Girl — Tue, 03 Jun 2008 00:49:00 GMT

Students at community colleges, for-profit universities, and other less competitive institutions may have trouble finding a lender willing to offer them federal student loans as some of the nation’s biggest banks pare down the list of schools they serve, according to an article that appeared today in The New York Times (“Student Loans Start to Bypass 2-Year Colleges,” June 2, 2008).

Citibank, JPMorgan Chase, PNC, and SunTrust are no longer offering student loans to certain colleges — schools that the banks have determined tend toward higher default rates, fewer borrowers, and small loan amounts that make business less profitable.

More than 6.2 million — over 40 percent — of the nation’s undergraduates attend community colleges. These students, according to the College Board, borrow an average of $3,200 a year.

In late May, Citibank, one of the nation’s largest providers of student loans, announced its student lending division, the Student Loan Corporation, would temporarily suspend lending to schools whose borrowers tend to have college loans with “lower balances and shorter periods over which we earn interest.” Citibank also announced it would cease lending to schools it anticipated to have minimal loan volume.

“The logic is so flawed, that for us to have volume with them in the future, we have to have had volume with them in the past,” said Korey Compaan, financial aid director at William Jessup University in Rocklin, Calif. To deny federal student loans to students based simply on the college they attend, he said, is “totally and completely unethical.”

Sallie Mae and Nelnet have recently reaffirmed their commitment to offering federal college loans regardless of the institution a student attends. And Wells Fargo has contacted financial aid administrators at schools dropped by Citibank to express a willingness to lend to their students.

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Student Loan Blog : Wells Fargo

Pastors Indicted in $4 Million Student Loan Scheme

Banks Become More Selective, Leaving Some Colleges Without Student Loans