Archive for Friday, April 6, 2007

Education officials connected to targeted student loan company

April 6, 2007

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— The federal Education Department official who oversees lenders owned about $100,000 worth of stock in a student loan company now under investigation in an expanding nationwide probe of the $85 billion student loan industry.

A September 2003 filing with the Securities and Exchange Commission shows Matteo Fontana held at least 10,500 shares of Education Lending Group Inc., the former parent company of Student Loan Xpress. The shares were valued around $9.50 each at the time, according to New York Attorney General Andrew Cuomo's office, which is leading the investigation.

Fontana currently oversees all lenders and guarantee agencies that participate in the Federal Family Education Loan Program, Higher Ed Watch reported.

Student Loan Xpress is now part of CIT Group Inc., one of several lenders targeted in Cuomo's probe.

Fontana's stock ownership was first reported Thursday by Higher Ed Watch, part of the New America Foundation.

The Education Department did not immediately return a call for comment. Fontana did not immediately respond to an e-mail message seeking comment and his assistant said he was out of the office Thursday afternoon.

What started as a probe into possible kickbacks to school officials for steering students to certain lenders has mushroomed this week as investigators revealed ties between high-ranking financial officers and the loan companies.

Cuomo's investigators say they have found numerous arrangements that benefited schools and lenders at the expense of students. In some cases, investigators said, lenders provided all-expense-paid trips to exotic locations for college financial aid officers who directed students to the lenders.

On Wednesday, Cuomo's office sent a subpoena to Columbia University and sent letters to the University of Southern California and the University of Texas seeking information about financial aid officers ownership of stock in Education Lending Group.

The SEC records show David Charlow, the associate dean of student affairs at Columbia University, owned 7,500 shares of Education Lending Group's stock and owned 2,500 stock warrants at the time of the stock prospectus.

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