Attorney General Cuomo Announces Student Loan Settlement With Emerson College That Returns $780,000 To Students
NEW YORK, NY (July 21, 2009) - Attorney General Andrew M. Cuomo today announced an agreement with Emerson College that returns $780,000 to students as part of the Attorney General’s broad investigation into the student loan industry. Attorney General Cuomo found that Emerson’s financial aid office and its former Director of Student Financial Services were engaged in conflicts of interest and deceptive practices. The investigation was conducted jointly with the Massachusetts Attorney General’s Office.
Under today’s agreement, Emerson will pay over $780,000 to more than 4,000 students and graduates, including approximately $81,000 to 400 New Yorkers. Emerson also agreed to adopt Attorney General Cuomo’s student lending Code of Conduct, which prohibits schools and financial aid officials from accepting payments or services from student lenders in exchange for placement on the schools’ preferred lender list.
“When we began our investigation into Emerson College, a list of the activities that were carried out by their financial aid office and former director could have served as a list of exactly what a school should not do,” said Attorney General Cuomo. “Their financial aid office put personal preferences for expense-paid trips and free giveaways over the best financial interests of their students. The director of financial aid was even getting paid thousands of dollars from one of the lenders the college was recommending to students. With this agreement, Emerson has changed its practices to better serve its students, and I am pleased to resolve this investigation.”
The Attorney General’s investigation revealed that Emerson had engaged in a host of deceptive practices that hurt the financial interests of its students. Emerson’s financial aid office encouraged students to use lenders from Emerson’s “preferred” lender list. The investigation found that lenders that appeared on this list provided Emerson’s financial aid staff with expense-paid trips to resorts, free meals, tickets to professional sporting events, and payments for attending lender advisory board meetings. In addition, Emerson’s preferred lenders provided Emerson with a variety of free and discounted goods and services, including temporary staffing, printing services, donations, and software.
The Attorney General’s investigation found that Emerson’s former Director of Student Financial Services, Daniel V. Pinch III, entered into an arrangement with a student loan provider, Collegiate Funding Services, Inc. (“CFS”), in which Pinch agreed to provide consulting services in return for a monthly fee of at least $1,500 per month. Pinch received approximately $36,000 from CFS. During this period, CFS was a “preferred” lender of the College. In June 2007, while the Attorney General’s investigation was pending, Emerson terminated Pinch’s employment.
The Attorney General’s investigation also found that, contrary to Emerson’s representations to students and families, the terms and repayment benefits offered by some preferred lenders were not “among the best in the industry.” Emerson also made it difficult for students to borrow from lenders that were not on the preferred lender list, and even sent letters to students discouraging the use of non-preferred lenders. Emerson also assigned students to particular preferred Stafford loan lenders if the students failed to designate a Stafford loan lender, and the lender that Emerson assigned students to, RBS Citizens, N.A., was actually the more expensive of the College’s two preferred Stafford lenders during this period.
The Attorney General’s investigation further found that for several years, Emerson offered a financial aid hotline for students and parents seeking advice concerning educational borrowing options. Although hotline callers were told that they were speaking with Emerson College, the hotline was actually staffed and operated by one of Emerson’s preferred lenders, SLM Corporation (Sallie Mae).
Finally, the Attorney General’s investigation revealed that Emerson entered into a revenue sharing arrangement with Education Finance Partners (“EFP”), a private student loan provider. Pursuant to this arrangement, Emerson received a percentage of loans made to Emerson students. During the term of this agreement, Emerson put EFP on its preferred lender list. Emerson did not disclose its relationship with EFP to students or their families.
Attorney General Cuomo’s nationwide investigation into the student loan industry has resulted in settlements with the largest student lenders in America and 28 schools. The settlements have resulted in the return of over $3.5 million dollars to students and their families. Cuomo has also established a multimillion dollar National Education Fund that is dedicated to educating and assisting the country's high school students and their families about the financial aid process.
Furthermore, Cuomo’s Code of Conduct has become New York State law as the Student Lending Accountability, Transparency, and Enforcement (SLATE) Act of 2007 and became national law as the federal Higher Education Opportunity Act of 2008.
The investigation and settlement were handled by Special Counsel Carolyn Fast under the supervision of Joy Feigenbaum, Bureau Chief of Attorney General Cuomo’s Consumer Frauds and Protection Bureau.