Something is seriously wrong! Perhaps the "loan" company needs to be reported to officials. I have never heard of such a thing in my entire life.
Her college should be helping her to obtain financing. How could a potential student possibly afford such a move. Wtihout researching it, it sounds as though it may even be criminal.
I would check which Senators and Congresspersons were on the Education Committee and speak with their staff members. It sounds outrageous.
Are they asking for collateral? An example might be putting up some money in case she defaults. This should not be in a student loan. It makes sense in commercial loan. Students rarely have any assets. It sounds as tho no one has flagged your sister as a special case, that involves discretion. Bureaucracies just love to shove everyone together.
It was great that you help the other former Witness. In my case, I was so positive that I wanted college but it was very scary. A law school friend who happened to be black, worked in conjunction with the admissions office to stop targetting a few elite wealthy blacks in the Ivy League. He suggested focusing on equally bright students from traditional black colleges in the South. The school would not be competing for the same bodies as the rest of the top tier schools. Everyone worked so hard, flying all around the country. They were encouraged, giving full financial aid and lving expenses. Everyone loved the idea. Tutoring and other help was promised. Repeated phone calls were made to encourage enrollment. Not one student accepted the package. They were too afraid to come up North.