Attorney General Cuomo Opens New Front In Expanding College Loan Investigation
New York (May 3, 2007) - New York State Attorney General Andrew M. Cuomo today announced his office has opened a new front into the widespread deceptive practices of the college loan industry. His office has begun serving subpoenas and requests for information on 90 college alumni associations seeking full disclosure of their relationships with Nelnet, one of the nation's largest student loan consolidation companies.
" Unfortunately it appears that student loan scams don't end at graduation. Today we have taken the next step in bringing justice to students and former students who have been victimized by the college loan industry. " said Attorney General Cuomo. "Our latest action targets alumni associations across the country and their relationships with one of the nations' largest loan consolidators - Nelnet."
The Office's investigation is examining whether alumni associations received and failed to disclose payments from Nelnet for steering their members exclusively to the student loan consolidator. The Attorney General is also seeking information regarding the structure of those fee arrangements which may include revenue sharing or other payments.
The subpoenas and requests for information specifically ask alumni associations to provide:
- All documents pertaining to the criteria used for selecting student loan consolidator partners;
- All documents establishing how the relationship with Nelnet began;
- All documents which show whether the alumni association compared other loan consolidators' rates to those of Nelnet;
- All benefits given by Nelnet to any employee of the alumni association including meals, trips, gifts or other perks;
- All contracts between the alumni association and Nelnet or other lenders;
- All documents showing payments made by Nelnet;
- All documents reflecting communication between staff of the alumni association and the related university or college.
"Our investigation seeks to put an end to kickback schemes and pay-offs that benefit lenders and their partners - be they schools or alumni associations -- at the expense of students trying to control their debt," added Cuomo.
Nelnet's alumni partners in New York include, among others, associations at the Juilliard School, Niagara University, Le Moyne College, Manhattan College, City College, Iona College and SUNY (Buffalo, Cortland, Fredonia, and Upstate Medical Center campuses). Nelnet's alumni partners also include state universities and private colleges across the country such as San Jose State University, UC Riverside, James Madison University, Old Dominion University and the University of Illinois.
Nelnet, Inc., a Nebraska-based company, offers former students consolidation of their federal or private student loans. According to the company's website, Nelnet ranks among the nation's leaders in terms of total student loan assets under management. Overall, the company serves students in 50 states, has about 4,000 employees and touts more than $25 billion in net student loan assets as of March 31, 2007.
Today's inquiry marks a new phase in Cuomo's nationwide investigation into the student loan industry. The investigation has already resulted in agreements with the nation's four largest lenders: Citibank, Sallie Mae, JP Morgan Chase, Bank of America, as well as Education Finance Partners (EFP). As part of their agreements, Sallie Mae, Citibank, and EFP have agreed to put a combined $6.5 million into a consumer education fund to educate high school students and their parents about the college loan process.
In addition, 22 schools have committed to Cuomo's Code of Conduct, which establishes guidelines to protect students and the integrity of the student loan process.
The schools are: Dowling, NYU, University of Pennsylvania, Fordham University, Syracuse University, St. Johns University, St. Lawrence University, 29 State University of New York campuses, Long Island University, Salve Regina, Molloy College, Pace University, New York Institute of Technology, DeVry University, Career Education Corporation, Washington University, Mercy College, Manhattanville College, Marist College, Pratt Institute, Lewis & Clark College, and Texas Christian University.
Additionally, eight schools have agreed to reimburse students over $3 million for the cost of revenue sharing agreements. Those schools are NYU, Penn, Fordham, Syracuse, St. Johns, LIU, Salve Regina, and DeVry.