Monday, April 30, 2007 10:20PM
Chris Kelly, contributing editor
Colleges and universities across the country are now uncovering a scandal involving the student loan industry and financial aid offices. The discovery began last November when Andrew Cuomo was elected New York Attorney General and began examining the profitable, $85 billion college loan industry. What started as a small investigation into possible kickback incentives, quickly turned into something that shocked even the universities themselves.
Investigators uncovered secret arrangements between student loan lending companies and financial aid officers across the nation. In extreme cases, financial aid officers were sent on all-expenses-paid trips to exotic locations for directing a predetermined amount of students to the lenders. The case became particularly more scandalous when the US Department of Education official who oversees all lenders and guarantee agencies that participate in the Federal Family Education Program, Matteo Fontana, was involved. Fontana reportedly owned over $100,000 worth of stock options in a suspicious student loan company, Student Loan Xpress. Xpress is now part of CIT Group, Inc., one of the major targets in Cuomo’s investigation.
Fontana has recently been placed on paid leave due to the discovery. Other notable officials under investigation are University of Texas (UT) financial officer, Lawrence Burt, University of Southern California (USC) officer, Catherine Thomas, and Columbia University associate dean of student affairs, David Charlow. SEC records report that each officer purchased shares of lending companies for $1 a share and sold them shortly for approximately $10 each. The school officers believe to have each profited more than $100,000 over the span of their tenure.
The claims have now been referred to the US Department of Education’s inspector general, John Higgins, who will establish whether the officials violated any conflict-of-interest rules. The full investigation under Cuomo is still in progress.
