The Washington Post ran a great front page story today on a “non-profit” student loan provider that seems to be profiting quite a bit:

The nonprofit company [EduCap] also has become a financial boon for the accountant, Catherine B. Reynolds, and her family. The McLean-based company bought a Gulfstream jet worth about $30 million that she sometimes uses to fly friends and relatives around the world. It has given more than $9 million to a separate nonprofit company run by her husband and paid her $1 million in annual compensation. And the nonprofit donates millions to her favorite charities, including $400,000 to her daughter's private school.

This is not Reynolds’ first time making news. Our friends at the US Student Association have accused her company of using misleading advertising to attract students to expensive private loans. She also ruffled some feathers a few years ago by trying to give the Smithsonian $38 million. While giving generous donations to museums is nothing to frown upon, Reynolds insisted on maintaining a great deal of control over an exhibit in the Smithsonian's National Museum of American History.

“I had a very clear contract," says Reynolds. "This isn't, 'Let me give you $38 million, and then let's talk about what we're gonna do with it.'”

Yikes! After much mudslinging the donation was withdrawn, but I digress.

What struck me about the Washington Post story was Reynolds explanation of how her company helps students:

In an interview, Catherine Reynolds and her husband, Wayne R. Reynolds, rejected the criticism of private loans and EduCap, saying the company has helped more than 350,000 students pay for college.

And Catherine Reynolds, 49, of McLean, said she has helped students nationwide because the business model EduCap pioneered has been replicated by companies across the country, creating competition in the lending industry that has benefited families by reducing the overall cost of private loans.

"We're here to make a difference and do good," she said. "And I think we've done that."

So Wendy’s shouldn’t have to pay taxes for inventing the dollar menu, which was adopted by other fast food companies and drove down the price of burgers and chicken nuggets?

Like the heart attack inducing cholesterol in a double bacon cheeseburger, the often variable and always high interest rates for private loans can lead to a lot of pain for you and your family. Although sometimes necessary private loans are not such a great thing to peddle to young people. More from the Washington Post story:

But the company allows some students to borrow up to $50,000 a year, sometimes at 18 percent effective interest rates -- terms that most financial experts urge borrowers to avoid.

Unfortunately, these loans are growing faster than bellies on a fast food binge. There are several reasons for this explosive growth (like the stagnant cap on the amount you can borrow under the government loan programs), but the results of a new initiative at Barnard suggest that students and parents would be much better off if they knew all of their options before taking out private loans.

By requiring a chat (usually by phone) with a financial aid officer before certifying to a lender that a student was enrolled in school, the school managed to reduce the amount of private loans their students took out by 73%.