A new report asserts that lenders are discriminating against student loan borrowers based on the college they attend.

The report by D.C.-based nonprofit Student Borrower Protection Center (SBPC), which is headed by a former top student loan official at the Consumer Financial Protection Bureau (CFPB), created hypothetical applicants who attended community colleges and four-year colleges.

The aim was to evaluate how consumer finance lenders use an individual’s education history to screen borrowers for creditworthiness and whether that is fair. SBPC argues that in this situation, it’s not, and that the implications are troubling.

“The use of education data in underwriting raises significant fair lending concerns, and its widespread adoption could reinforce systemic barriers to financial inclusion for Black and Latinx consumers,” the report states, adding: “Where the effects of these practices have negative economic consequences for borrowers from historically marginalized communities, these practices are known as ‘Educational Redlining.’”

‘Charged nearly $3,499 more over the life of a five-year loan’

Researchers submitted online inquiries for private student loan offers to Wells Fargo and estimated the overall cost of a $10,000 loan, as well as inquiries to lending platform Upstart for a $30,000 student loan refinancing product.

They found that borrowers attending community colleges, Historically Black Colleges and Universities (HBCUs), and Hispanic-Serving Institutions (HSIs), are more likely to pay significantly more for loans.

“Wells Fargo charges a hypothetical community college borrower an additional $1,134 on a $10,000 loan when compared to a similarly situated borrower enrolled at a four-year college,” the report stated. “When refinancing with Upstart, a hypothetical Howard University graduate is charged nearly $3,499 more over the life of a five-year loan than a similarly situated NYU graduate.”

If that borrower was from New Mexico State University-Las Cruces, which is an HSI, they were charged “at least $1,724” more over five years compared to an NYU grad.

The report’s findings show that “borrowers can be forced to pay a penalty because of who they sit next to in the classroom,” Seth Frotman, SBPC Executive Director, stated in a press release. “Despite assurances by these lenders that their practices lift up consumers from marginalized communities, our analysis shows that educational redlining can further drive disparities and inequality. It is time for law enforcement to act.”

‘We disagree with the study’s characterizations’

Wells Fargo and Upstart both didn’t agree with the findings, however, arguing that they were “exaggerated” and “contrived.”