By: Gaurav Bhola, MSM, Managing Editor
The student loan consolidation program and student loan scandal keeps on rolling. New York Attorney General Andrew Cuomo, son of former Governor Mario Cuomo has been carrying out an epic investigation into the nexus between universities and student loan lenders. The investigation was sparked by an ad run by a small loan company in the New York Times insinuating kickbacks are provided by student loan lenders to colleges and university officials and their financial aid departments.
Questions of conflict of interest arose and Cuomo started sniffing into the multi-billion dollar student loan industry. The student loan lenders on regular occasions induced college financial aid officials with rewards of several hues to steer students toward them. By offering revenue sharing agreements, student loan company stock, trips, meals, and other gifts to college, private school, and university officials, lenders would earn a place on the preferred list of lenders. These preferred lists would be presented to students and their families as the only option available to them for student loans. Of course, the students and their parents were in the dark about this alliance.
Unfortunately, students were uninformed of other options, as would be expected in a competitive marketplace. Alas, scores of students have paid exceedingly higher loan interest rates to lenders that could have been avoided.
For months Cuomo has been delving into the alliance between student loan lenders and colleges. His investigation is now leading to the path of athletic departments. This week Cuomo’s office served subpoenas and records requests to forty college athletics departments, 38 in the NCAA's top-tier Division I. Also, University Financial Services (UFS), a Florida based student Financial Service Company was issued a subpoena.
The attorney general would like to delve deeper into the relationship UFS has with some of the athletics departments. Several of the athletic department websites have UFS’s logo on them which link to UFS’s student loan website. The investigation may bear out that in return for their endorsement the athletic departments and their employees received payments or gifts in the form of meals, trips, and etc. That has yet to be determined.
Or it may simply be that a school sold sponsorship space just like any other company. Rather than a school endorsing UFS and referring students to them, UFS, just like Coca Cola paid for product placement advertising, which is now common on university campuses.
The investigation into athletics departments arose out an agreement exposed between Dowling College and UFS. It was revealed that UFS would pay $75 to the athletics director for every loan application generated from the athletic department. Also the department would guide students to UFS directly by promoting UFS materials and indirectly on through their website by UFS link placement.
Under a settlement agreement between Cuomo’s office and Dowling University, the agreement with UFS was terminated and the school signed the attorney general’s code of conduct. Cuomo has reached similar agreements with many universities and lenders across the nation, garnering more than $10 million in settlements.
Early this year student loan giant Sallie Mae under examination by Cuomo for deceptive college student loan lending practices, settled to avoid an investigation and possible criminal action. Consequently, Sallie Mae agreed to amend its student loan lending standards. The new Sallie Mae student loan standards will meet the code of conduct for student loan practices instituted by Andrew Cuomo.
