Cuomo Announces First Multi-state Agreements In Student Loan Investigation
(NEW YORK, NY) April 23, 2007 - Today Attorney General Andrew M. Cuomo announced the first multi-state settlements in his nationwide student loan investigation. Cuomo and Missouri Attorney General Jay Nixon announced an agreement with Washington University in St. Louis, over its student loan practices. Cuomo and Illinois Attorney General Lisa Madigan also announced agreements with DeVry University and Career Education Corporation, two for profit post-secondary institutions.
Washington University signed an agreement with New York State agreeing to the College Loan Code of Conduct and a separate agreement with the State of Missouri. New York and Illinois jointly signed the agreements with DeVry and CEC.
“Across the country, momentum is building behind our investigation into the student lending industry. The Code of Conduct is being adopted nationally as the paradigm for best practices in the industry,” Cuomo said. “Cooperation between states is vital to our goal of enhancing the integrity of the student loan process and helping students nationwide.” Cuomo thanked Attorneys General Nixon and Madigan for their work.
“Students and their parents often are presented with limited choices and information on lenders,” Nixon said. “They may feel unempowered as consumers, being steered to particular lenders without receiving
sufficient data to make fully informed choices. We want to make certain our concerns about students being able to make informed decisions to get the best loan interest rates are fully addressed.”
"Illinois students are entitled to full disclosure of the criteria used to place lenders on the schools' preferred lender lists and should have access to all of the information necessary to ensure that they are able to choose the loan that is best for them," said Madigan. "We acknowledge DeVry University and Career Education Corporation for promptly adopting the College Code of Conduct. We will continue to
review the school loan lending practices of all the schools in Illinois."
DeVry University: DeVry University is a for profit post-secondary school based in Oakbrook Terrace, Illinois. DeVry has 80 campuses in the U.S. and Canada, including campuses in New York State. DeVry was paid $88,112 by Citibank under a revenue sharing agreement. DeVry received 200 basis points on all loans referred to Citibank in 2004 and 2005. Under the agreement, DeVry will reimburse $88,112 to affected students. DeVry employees also sat on lender advisory boards and were reimbursed for travel and meals to advisory board meetings. DeVry, having now signed the Code of Conduct, will stop all of these practices.
Career Education Corporation: Career Education Corporation is a for profit secondary school based in Hoffman Estates, Illinois and has campuses in New York State. Two lending institutions made a total of $21,200 donations to CEC’s scholarship fund. CEC will contribute $21,200 to the Consumer Education Fund, which will be a nationwide consumer education fund for high school students and parents.
Washington University: Washington University in St. Louis had a revenue sharing agreement with Education Finance Partners in 2005, but received no payments under the agreement. Additionally, two lenders paid for the printing costs for informational materials provided to prospective and current students.
Cuomo’s nationwide investigation into the student loan industry has already resulted in agreements with Citibank, Sallie Mae, and Education Finance Partners and 15 universities or schools. In addition to the schools announced today, the schools are: NYU, University of Pennsylvania, Fordham University, Syracuse University, St. Johns University, 29 State University of New York campuses, Long Island University, Salve Regina, Molloy College, Pace University, and the New York Institute of Technology. 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.
DeVry, CEC, and Washington University agreed to the Attorney General’s College Loan Code of Conduct.
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.