Cuomo And State Senator Ken Lavalle Announce Settlement With Dowling College In Student Loan Investigation
HAUPPAGUE, NY - (May 3, 2007) Attorney General Andrew M. Cuomo and State Senator Kenneth Lavalle today announced that Dowling College had agreed to the Attorney General's College Loan Code of Conduct in its student loan practices. Lavalle is Chairman of the State Senate Higher Education Committee and has introduced the SLATE (Student Lending Accountability, Transparency and Enforcement) Act that unanimously passed the State Senate on April 25th.
Cuomo said. "Today's agreement with Dowling is great news for Long Island students and parents who are concerned about the student lending industry. Schools and lenders are no longer defending these practices or refusing to recognize the problem - they are looking for a solution. With Dowling, LIU, SUNY Old Westbury and Stony Brook, and NYIT agreeing to the Code of Conduct, thousands of Long Island students and parents can be sure that their loans will not be tainted by conflicts of interest." Cuomo said. "I'd like to thank Senator Ken Lavalle for all his work in passing the SLATE Act in the State Senate and urge its final passage by the State Legislature. Because of his concern for the integrity of the student loan process, New York's hard working families should be assured that loans in this state will be marketed only with the best interest of the borrowers in mind."
"I am happy to be partnering with Attorney General Cuomo to protect vulnerable young students from those who would abuse a trusted relationship in the interest of making a profit," said Senator Kenneth P. LaValle. "The legislation I have introduced will keep students from being exploited by colleges, lenders, and third party entities when taking on financial debt they will most likely carry for many, many years. "Students and parents have faith in the expertise and guidance offered by higher education lending and learning institutions. This relationship must be protected and students must be ensured that they are not steered into agreements that generate excessive debt, while lining the pockets of greedy individuals."
Dowling College has three campuses on Long Island, in Melville, Oakdale, and Shirley. Dowling College had a school-as-lender relationship with Sallie Mae under which Dowling agreed to exclusively market Sallie Mae to students seeking to consolidate their loans. Dowling could be required to pay Sallie Mae a penalty if a loan sold to Sallie Mae through the school-as-lender relationship was eventually consolidated through another lender. Without knowledge of the College's administration, in February 2006 the Athletic Director entered into an arrangement with University Financial Services (UFS) where UFS would provide a Federal Student Loan Consolidation Program at the College. The UFS agreement would allow the company to use Dowling College mascots and logos in marketing material and would use Athletic Department interns to distribute marketing material at College events. For each loan consolidated under this program, the College would receive $75. Dowling never received any money under this arrangement, however. Sallie Mae also bought theater tickets for Dowling employees on a few occasions. Under the agreement signed with the Attorney General, Dowling ended these relationships and agreed to the Attorney General's College Loan Code of Conduct.
The newly announced agreement brings to a total of 22 the number of schools who have committed to Cuomo's Code of Conduct. Cuomo's nationwide investigation into the student loan industry has already resulted in agreements with Citibank, Sallie Mae, JP Morgan Chase, Bank of America and Education Finance Partners (EFP) and 15 universities or schools. In addition to Dowling, the schools are: 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. 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. In total, the three lenders have agreed to put $6.5 million into a consumer education fund to educate high school students and their parents about the college loan process.
The Code of Conduct includes:
- Colleges are prohibited from receiving anything of value from any lending institution in exchange for any advantage sought by the lending institution. This severs any inappropriate financial arrangements between lenders and schools and specifically prohibits "revenue sharing" arrangements. Lenders can no longer pay to get on a school's preferred lender list.
- College employees are prohibited from taking anything of more than nominal value from any lending institution. This includes a prohibition on trips for financial aid officers and other college officials paid for by lenders.
- College employees are prohibited from receiving anything of value for serving on the advisory board of any lending institution.
- College preferred lender lists must be based solely on the best interests of the students or parents who may use the list without regard to financial interests of the College. This ensures that preferred lenders will be those the school has determined should be preferred by students as opposed to preferred by the school.
- On all preferred lender lists the College must clearly and fully disclose the criteria and process used to select preferred lenders. Students must also be told that they have the right and ability to select the lender of their choice regardless of the preferred lender list.
- No lender may appear on a preferred lender list if the lender has an agreement to sell its loans to another lender without disclosing this fact. In addition, no lender may bargain to be a preferred lender with respect to a certain type of loan by providing benefits to a College as to another type of loan.
- Colleges must ensure that employees of lenders never identify themselves to students as employees of the colleges. No employee of a lender may ever work in or provide staffing assistance a college financial aid office.