EduCap: A For-Profit Company in Non-Profit Clothing

The next time someone says you can't get rich working in non-profits, just show them the story on EduCap in today’s Washington Post. EduCap is a “non-profit” private student loan company, whose CEO receives $1 million in annual compensation. This story makes you rethink what it means to be a non-profit, and it also underlines how much money—and how little oversight—is in the whole student financial aid game.

The article details (although it still left me a little confused…) the corporate structure of EduCap—a nonprofit lending company that owns both the Catherine B. Reynolds Foundation and Loan to Learn, it’s lending brand.

Despite it’s non-profit status, which exempts it from paying federal income taxes, EduCap reaps enough profits to buy a Gulfstream IV Jet, to take its board on retreats to the Bahamas , and to offer to fly financial aid officers and their spouses to a Carribean island for an all-expense paid conference (which did not happen after intense media scrutiny).

The CEO claims that EduCap helps students by offering private loans to bridge the gap between federal loans and the cost of college. But I have to wonder how offering a high-risk student (probably low-income, and with little or poor credit history) a large amount of loan money at a high interest rate (18 percent in some cases) is helpful. It’s more likely to put these students at risk of bankruptcy or a lifetime of student loan debt.

If EduCap really wanted to help these students, it would, like a true non-profit, cut down on the perks and the million-dollar CEO salary and use its profits to offer at-risk students grants and/or loans at very low interest rates. If it doesn’t want to do this, then it should call itself what it is—a for-profit private loan company.

*An illustrated example of how non-profits in the student loan industry get rich: StudentLoanFollies.pdf