Student loan scam snares JP Morgan

[Hibush]

In the news today is an especially juicy story of a little knowledge of higher ed was dangerous.

It starts with a tech startup providing a service that helps students fill out the FAFSA, a website called Frank.
Hyped as providing great growth and access to a bunch of students.
JPMorgan is interested, not in helping students find loans or even providing those loans. They really want lifelong customers. So they are willing to pay a lot for those accounts.
The tech startup understands what value JPMorgan sees, and realizes that more accounts will be worth more money in a buyout. A little pumping is in order.
JPMorgan ends up paying $175 million for the site's reported 4.25 million accounts. That is $41 per lead.

Two problems arise.
First, JPMorgan discovers that they can only use the email addresses, not the financial data because of Education laws. $41 per email address is not a very attractive value proposition.
Second, most of the addresses are fake.  They were generated by an enterprising "data science professor at a New York-area college".  They really got about 0.3 million email addresses, at a cost of $580 each. An even less attractive value proposition.

In the end, the whole website has been replaced with a forward to StudentAid.gov. Which applicants could have used directly the whole time. Was there ever any value the service would have added to that?

Watching a big investment bank get egg on its face from not vetting an entrepreneur in a business they don't understand is admittedly amusing. What I really want to know is how the college professor made out in the side gig.

[apl68]

When I saw this, I thought it was going to be about scamming students getting or trying to get loans.  It was a relief to learn that the victims of the scam will probably be able to absorb the loss pretty easily.

The site likely would not have added very much value, all right.  Which I'm sure could be said of a great many tech startups, even some that made more money than this.