Student loan corruption seems confined to Northeast / LJWorld.com

Archive for Wednesday, April 11, 2007

Shady financial arrangements uncovered in N.Y., Pa.

J-W Staff and Wire Reports

April 11, 2007

The situation described for student lending in New York - cozy relationships and kickbacks between lenders and schools - isn't happening in Lawrence, Kansas University leaders said Tuesday.

"We do not recommend any lenders, and we're very clear on that," KU financial aid director Brenda Maigaard said.

The New York attorney general's office is investigating alleged kickbacks to school leaders who steered students to certain lenders. Investigators say they have found arrangements that benefited schools, financial aid officers and lenders at students' expense.

The closest involvement KU has with a student lending company, spokesman Todd Cohen said, is a program started this year to provide an additional option for federal Stafford loans to graduate students.

KU formed the nonprofit KU Student Assistance Corp. to administer the loans and chose Kansas State Bank and Citibank as partners after a bidding process, Cohen said. KU benefits from the program by receiving a portion of the corporation's revenues to use for need-based student grants.

Cohen said that's the only benefit to the school, and that KU doesn't steer students to that program at the exclusion of other loan programs.

Since 1996, KU has participated in the federal "direct loan" program for graduates and undergraduates, which means students go through the university to get a Stafford loan directly from the government. They also can choose a private lender.

To read about the investigations into widespread abuses at several schools in New York and Pennsylvania, see page 4A.