Colleges across the country have come under scrutiny for their student loan practices in an ongoing investigation being conducted by New York State Attorney General Andrew Cuomo’s office ‘ including all 29 of the State University of New York’s four-year campuses. According to The Associated Press, six lenders and more than 100 public and private colleges have been accused of inappropriate behavior in establishing controversial preferred lender lists for students, in many cases with schools and financial aid advisers receiving money and vacations in exchange for inclusion on the lists.
Departing SUNY Chancellor John Ryan has come under fire as he currently serves on the board of directors of CIT, a company that owns the lender Student Loan Xpress. The company is currently under investigation for stock transactions made with financial aid officers at Columbia University, the University of Texas and the University of Southern California. While the company claims the transactions took place before CIT acquired the company in 2005, the Attorney General’s office has issued subpoenas for their records.
Student Loan Xpress is also listed as a preferred lender at SUNY Maritime College, where Ryan served as president from 2002 to 2005.
On April 2, however, all SUNY schools agreed to abide by a code of conduct created by Cuomo’s office. The code prohibits college employees from receiving anything of monetary value from lenders in exchange for placement on preferred lenders lists or from receiving payment for serving on an advisory board of any lending institution.
‘SUNY has signed and will abide by the code of conduct established by the New York State attorney general,’ said SUNY spokesperson David Henahan in a statement. ‘We agree with the attorney general that families need full disclosure about the criteria used to develop suggested lender lists and that they know they have freedom of choice on use of lenders.’
While SUNY has agreed to follow the code, Henahan emphasized that SUNY has not been accused of any illegal behavior.
‘No finding of deceptive or illegal practices has been made against any SUNY campus,’ he said.
Director of Media Relations Gail Glover said that BU has examined the school’s loan practices since the investigation began and found nothing to be remiss.
‘Binghamton University adheres to the highest legal and ethical practices on student loans,’ she said. ‘Even before the April 2 settlement, the University had conducted an evaluation of its practices against suggestions and guidelines from the attorney general’s office. Based on those suggestions, we are in compliance.’
BU lists lenders on its financial aid Web site that are recommended ‘for their quality customer service, ease of application and timeliness of funds disbursement.’ Lenders listed include Citibank and Sallie Mae, both of which have been implicated in the investigation.
Sallie Mae and Citibank have both agreed to stop offering perks to college employees and pay $2 million each to a fund that will help to educate parents and students about the financial aid industry.
So far six schools, including New York University and The University of Pennsylvania, have been ordered to pay $3.27 million that they received from lenders back to students.