In April and May, there was some news that some colleges and universities were doing some unethical business with lenders. Schools may be thinking of their own back pockets before considering the needs of those taking on student loans.
Officials at Columbia University, the University of Southern California and the University of Texas at Austin were in some hot water. According to the Wall Street Journal, New York Attorney General Andrew Cuomo is intensifying his investigation into student lending at the institutions from a company that was listed as a preferred lender at the institutions.
Cuomo's office subpoenaed Student Loan Xpress Inc., a unit of CIT Group Inc., and Columbia. New York officials also sent letters to the other two schools to see if the financial-aid officials received shares in the company in exchange for placement on the "preferred lists."
Columbia maintains that a top aid official, David Charlow, "had a financial interest in one of our preferred lenders." The school says it placed Charlow on paid leave pending the investigation and notified the attorney general.
Cuomo continues to examine 100 universities and six student lenders for what he has called widespread conflicts of interest in college aid offices.
In April, eight other universities, including the University of Pennsylvania, New York University and Syracuse University, settled allegations of loan kickbacks by agreeing to stop accepting payments, travel and other perks from student lenders. The colleges denied wrongdoing.
The WSJ reported that five of the eight colleges agreed to refund $3.27 million to students because of revenue-sharing agreements. The schools received a payout—or kickback—on the percentage of loans they referred to lenders.
In 2003, the National Association of Student Financial Aid Administrators considered setting clear rules to curb gifts from lenders—but they didn’t. That same year, a NASFAA task force wanted to keep tabs on connections between aid officers and the lenders who wanted business and urged the board to propose a federal law making lenders report gifts over $50. But the board rejected recommending the policy—even though most of the 3,000 post-secondary institutions reportedly didn’t know about any of the activity. Currently, NASFAA officials object a U.S. Dept. of Education plan to require colleges to list at least three loan companies as preferred.
The irony? The group’s June conference included 25 sponsorship opportunities including the rights to print company names on pens for a mere $5,000, or to host beverage breaks where lenders can hand out cups with their logos on them. The WSJ reported that dozens of student lenders spent at least $553,000 on sponsorship, exhibitor and advertising fees.
To get more information about financial aid and student loans, check out: