Financial firms may be discriminating against student loan applicants based on where they went to college, according to a watchdog group that applied for dozens of online loans.
The nonprofit group, Student Borrower Protection Center, applied for and received loan offers on the lender website Upstart, which the group said appears to be charging higher interest rates on student loans to graduates of historically black or predominantly Hispanic colleges.
“It really raised some alarm flags,” Kat Welbeck, civil rights counsel for the group, said in a statement.
The group, which documented a range of constant factors, posed as a number of different applicants, including as a 24-year-old man living in New York earning $50,000 a year as a financial analyst.
It used the fictional profile to apply several times, each time changing where the borrower went to school. In instance, he went to New York University, in another, Howard University in D.C., one of the country’s most famous historically Black colleges and universities.
“The only difference was where he went to school,” Welbeck said.
The group’s report also raised eyebrows with its finding that Wells Fargo offered better interest rates and loan terms to student borrowers at four-year colleges as opposed to those enrolled at two-year community colleges.
Wells Fargo, however, discounted the study’s characterizations.
“Wells Fargo has a longstanding commitment to providing access to financing for students attending community colleges,” the bank said in a statement. “We follow responsible lending practices that take into account expected performance outcomes and are confident that our loan programs conform with fair lending expectations and principles.”