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AP: College loan kickbacks PDF Print E-mail
Written by pressrepublican.com   
Saturday, March 31, 2007

ALBANY, N.Y. (AP) — New York state Attorney General Andrew Cuomo has offered colleges a way to escape legal action in his investigation into college loan kickbacks if they promise to follow a set of rules governing their role in the lucrative industry, according to published reports.
Cuomo sent settlement agreements to colleges around the country that he has accused of accepting kickbacks from student loan companies, the Chronicle of Higher Education reported Friday.
If the colleges didn't sign, Cuomo would serve them with subpoenas, the Chronicle reported. Colleges in New York were told to sign the agreement by Friday while colleges in other states were reportedly given a later deadline.
A spokesman for Cuomo would not confirm the report.
''The attorney general has had talks with colleges and lenders as the investigation has been widening,'' said John Milgrim. ''Any settlements, if and when they happen, will be announced when they are finalized.''
Newsday reported Saturday that three colleges on Long Island acknowledged getting the agreements. Long Island University, New York Institute of Technology and Dowling College officials said they received a ''code of conduct agreement'' from Cuomo's office Friday. The schools deny any wrongdoing.
''Literally, what we received is an agreement on a code of conduct,'' NYIT spokesman Jason Selss told the newspaper. ''There's a place to acknowledge whether you acknowledge the big problem between lenders and schools in general. There's also an area that would list charges, but NYIT's not being charged with anything.''
Robert Altholz, LIU's vice president for finance, told Newsday university officials were reviewing agreement.
Under the terms of the agreement, obtained by The Chronicle, Cuomo won't take action against colleges or their employees if they pledge to abide by the code of conduct and reimburse borrowers who took out private loans. The agreement prohibits college employees and trustees from accepting gifts from lenders, serving on paid lender-advisory boards, and entering into revenue-sharing contracts with private lenders.
It also strictly limits how colleges use preferred-lender lists, requiring them to disclose how they picked each lender and notify borrowers that they may choose any lender.
Six lenders and more than 60 public and private colleges have been swept up in the attorney generals investigation into the $85 billion college loan industry.
Cuomo's investigators say they have found numerous arrangements made to benefit schools and lenders at the expense of students. In some cases, investigators said, lenders provided all-expense-paid trips for college financial aid officers to exotic locations in return for directing students to the lenders.
Investigators found that many colleges have established questionable ''preferred lender'' lists and entered into revenue sharing and other financial arrangements with those lenders. Some colleges have ''exclusive'' preferred lender agreements with the companies.
While not illegal, Cuomo says such arrangements are deceptive and anticompetitive.
On March 22, Cuomo said he would sue a California student loan provider, claiming the company is making illegal kickbacks to schools in exchange for business. He sent a notice of intent to sue Education Finance Partners Inc., based in San Francisco. The notice was the first legal action to come from Cuomo's nationwide probe.
The company said it did nothing wrong and was prepared to defend its business practices.

 

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