Cuomo Announces Six Schools Agree To Code Of Conduct In Student Loan Investigation; Says "tide Has Turned" In Student Loan Investigation
NEW YORK, NY – (April 30, 2007) Attorney General Andrew M. Cuomo today announced six more colleges had agreed to his College Loan Code of Conduct. The schools are Marist College, Pratt Institute, Lewis & Clark, Manhattanville College, Mercy College, and Texas Christian University. Texas Christian also committed to reimburse students over $13,000.
“The tide has turned. Schools and lenders are no longer defending these practices or refusing to recognize the problem - they are looking for a solution,” Cuomo said.
The newly announced agreements bring to a total of 21 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 the schools announced today, 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, and Washington 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.
Mercy College: Mercy College has five campuses in New York City and Westchester, New York. Mercy College had three preferred lenders and did not always disclose that borrowers could choose a company not on the list. Mercy also contracted with Sallie Mae to have a call center staffed by Sallie Mae employees who did not identify themselves as Sallie Mae employees. University Financial Services (UFS) was a preferred loan consolidator for Mercy and under that agreement UFS would have provided printing services and other referral fees to Mercy. The College ended that agreement before receiving any money. UFS also made a $5,000 donation to a Mercy College awards dinner. Mercy has agreed to accept the Code of Conduct and will give $5,000 to the Office of the Attorney General for a consumer program for high school seniors and their parents. Mercy recently began disclosing the process used for selecting preferred lenders, along with other information, to all borrowers by distributing Attorney General Cuomo’s brochure on student lending. As of March 19, 2007, Mercy instructed Sallie Mae personnel to identify themselves as being employed by Sallie Mae; the college will also take steps to engage a call center provider that is not also a lender, or it will perform its own call center functions.
Marist College: Marist College is located in Poughkeepsie, New York. Certain employees of Marist College participated in lender advisory boards and attended seminars sponsored by private lenders, with the employees’ travel, lodging, and meals paid for by the lenders. During the period of 2005-06, Marist received goods and services from various lenders totaling nearly $5,000. In 2006, Marist entered into an Opportunity Loan agreement with Sallie Mae, in which Marist agreed to encourage its former students to consolidate their loans with Sallie Mae, and no other lender, and did not disclose the agreement. Also during 2006, Marist placed several lenders on their list of preferred lenders even though, as the college knew, all of the lenders on the lists had arranged to sell their loans to Sallie Mae. Marist has agreed to accept the Code of Conduct. Marist’s settlement had previously been made public.
Pratt Institute: The Pratt Institute has two campuses in New York City, in Brooklyn and Manhattan. An employee of Pratt Institute was a member of the Advisory Board of the College Loan Corporation, a Pratt preferred lender. The employee participated in meetings with the employee’s travel, lodging, and meals paid by the lender. In 2005, Pratt had an agreement with EFP, a preferred lender, in which EFP agreed to provide grants to needy students if Pratt’s EFP students’ loans exceeded $1,000,000. In February 2006, Pratt learned that EFP was charging a 15% interest rate to Pratt students and unilaterally terminated its agreement with EFP, also removing EFP from the preferred lending list. Pratt did not receive any money from EFP. Pratt has agreed to accept the Code of Conduct.
Lewis & Clark College: Lewis & Clark College is in Portland, Oregon. In 2006, Lewis & Clark entered into a revenue sharing agreement with EFP. Through the agreement Lewis & Clark received $5,000 from EFP, but has returned the money. Lewis & Clark’s director of financial aid served on one or more lender advisory boards and accepted travel and meal reimbursements for two meetings of a lender advisory board – one to Florida and one to Las Vegas – and took two expense paid trips to visit lender sites – one in Sacramento, California and the other in Sioux Falls, South Dakota. Lewis & Clark also accepted free printing services from lenders to offset costs in financial aid. NELNET, a preferred lender to Lewis & Clark, also contributed $9,000 in donations to the school’s general scholarship fund. Lenders have also provided staff support to Lewis & Clark but such staff never purported to be employees of the college. Lenders have also provided workshops on campus for teaching students and staff about various loan related topics. Lewis & Clark has agreed to accept the Code of Conduct.
Manhattanville College: Manhattanville College is located in Purchase, New York. Between 2004 and 2007, certain lenders on Manhattanville’s preferred lender list provided printing services to the College. Nelnet, a preferred lender, also bought theater tickets for a College employee on a number of occasions. Manhattanville has agreed to accept the Code of Conduct.
Texas Christian University: Texas Christian University in Forth Worth, Texas had a revenue sharing agreement with Education Finance Partners from which the University received $13,883. TCU’s director of scholarships and student financial aid had served on three student loan company advisory boards; Chase and Nellie Mae paid this director for expenses only related to meetings. In addition, various lenders provided printed materials to TCU students regarding student loan products. In a formal letter, TCU said it will reimburse $13, 883 to the students and will adopt the Attorney General’s Code of Conduct in its lending practices.
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.