Letter to AASCU Member Presidents and Chancellors
April 6, 2006
When initial news reports surfaced that New York Attorney General Andrew Cuomo was investigating student loan companies doing business in his state, I did not give it much attention. After all, Cuomo’s predecessor had effectively used his attorney generalship to confront corporate corruption and propel his own political career.
Cascading events this past week have illuminated and expanded this probe beyond New York. There are now a sufficient number of revelations and malodorous allegations to raise a caution flag for the higher education community—and especially for presidents and chancellors.
Highlights of media accounts include:
Allegations that campuses in New York and nationwide received benefits (referred to as “kickbacks”) from student loan companies as quid pro quo for being listed by the institution as a preferred lender.Rumors abound that other instances of questionable relationships between campuses and the student loan industry may come to light as well.
Reiteration of earlier media stories that the student loan industry provides extraordinary benefits (including athletic event tickets and industry-financed conferences at posh resorts) for student financial aid officers.
Revelation that three student financial aid directors served on an advisory board to one of the lenders and, in turn received, company stock. Apparently, two of the three directors have sold that stock, one generating $100,000 in personal profits from the sale.
Yesterday’s exposure that a high-ranking U.S. Department of Education officer having responsibility as the primary liaison with student loan companies owned about $100,000 worth of stock in a student loan company currently under investigation.
Presidents and chancellors may wish to ascertain:
Whether funds coming to the campus from the administration of student financial aid programs (such as donations from student loan companies or the 5% set aside provision from administration of federally-funded student aid programs) have been appropriately recorded and utilized;
In the event an institution designates “preferred lenders” and conveys this information to students and parents, that there are no financial transactions between such lenders and the campus—and, if so, how such dollars have been used and accounted for;
The process for determining the designation of “preferred lenders” is open and transparent, and students utilizing “preferred lenders” have not been disadvantaged;
Whether the institution’s “conflict of interest” policies have been fully understood and implemented by student aid officers and other campus officials having responsibility for the administration of student aid.
We, of course, have no way of knowing what might unfold in the weeks ahead. Should student loan scandals and any indictments gain expanded media attention, we would expect local media inquiries. We would not be surprised to see as well some Congressional activity, as the student loan industry’s ties to the former Republican Congress and its political activity in the last election, may provide additional impetus to the new Congress to undertake greater investigation.
Constantine W. Curris
President