Student Loan Bubble typically focuses on the fundamental questions of student debt in the United States, but as this topic gets more attention, it is inevitable that those companies involved in this industry will also receive more attention.

An ongoing theme of Student Loan Bubble is the structural similarity to the US housing bubble, such as high-risk loans to individuals with no collateral or credit history, decade-long repayment schedules, and variable interest rates. Given the spectacular collapse of the US housing industry and the level of fraud that was later uncovered, it should not be surprising that some are asking the same questions of the student loan industry.

Between bringing a lawsuit against lending companies and established guilt, a lot of evidence must be presented before the connection is made. Student Loan Bubble is curious to watch this case as it unfolds.

Excerpt from: http://www.businessinsider.com/jpmorgan-citi-charg…

The 285 page suit [...] says Nelnet illegally induced students to apply for federal student loans, paying telemarketers to aggressively push the government product, and used false advertising to get more applications, like promising that students would save thousands of dollars in interest payments by consilidating their loans with Nelnet. They then presented false claims to the Department of Education to receive federal funding.

According to the suit, JPMorgan and Citi alledgely “ratified and/or authorized the wrongful acts of Nelnet and have benefitted from such conduct.”

Without specifying a total amount, the suit asks for triple the U.S. claim payments and other damages, plus civil penalties. It asks for $5,500 to $11,000 for each claim Nelnet presented to the Department of Education between 2004 and 2007 (the number is unclear).

The government could have intervened in the suit, but declined, according to court filings.