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Archive for Wednesday, August 1, 2007

KU subpoenaed in student loan scheme; university denies direct link to troubled company

Andrew Cuomo said Wednesday that he served 39 universities with subpoenas

August 1, 2007, 3:50 p.m. Updated August 1, 2007, 4:00 p.m.

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Marchiony on subpoena

Jim Marchiony, associate athletic director at Kansas, talks about the subpoena from the New York Attorney General's office. Enlarge video

— New York Attorney General Andrew Cuomo is now investigating whether top college athletic departments nationwide - including Kansas University - steered student athletes to education lenders in exchange for kickbacks.

Cuomo said Wednesday that he served 39 universities with subpoenas and requests for documents about deals between athletic departments and Student Financial Services Inc., which operates as University Financial Services. He said he's looking at how team names, mascots and colors were used to suggest the company was the college's preferred lender.

"Students trust their university's athletic departments because so much of campus life at Division I schools centers around supporting the home team," said Cuomo. "To betray this trust by promoting loans in exchange for money is a serious issue, especially when Division I schools already generate tremendous revenue from their student athletes."

Jim Marchiony, associate athletic director at Kansas, said no one from the New York attorney general's office ever contacted the university. He also said the athletic department did not have a direct relationship with University Financial Services.

"Kansas athletics does not give out the names of current or former student-athletes to UFS, and we do not receive a penny from UFS based on how many students or student-athletes apply for student loans with UFS," Marchiony said.

"The sponsorship deal that UFS has is exactly like dozens of other sponsorships - like the local grocery store or the local car dealer or the local hotel - and all of these are with our rights holder, not with us," he added.

Cuomo began the investigation as an outgrowth of his national probe of student loan providers and college administrators, which he said uncovered a pattern of favoritism for lenders who provided kickbacks, "revenue sharing" plans, and trips and other gifts in exchange for designations as recommended lenders. Sometimes the colleges provided campus employees to staff telephone banks for lenders drumming up business.

Cuomo's findings led to state and national reforms.

"Today's action is an important new step as we continue to examine the unethical conflicts that pervade the student loan industry," Cuomo said.

Spokesmen for Auburn, Ohio, and Texas Christian universities didn't immediately respond to requests for comment. The loan company couldn't immediately be reached for comment.

Cuomo said that during his first investigation, he found the athletic director of Dowling College on New York's Long Island entered into a revenue sharing agreement with University Financial Services that paid the college $75 for every new loan application, exclusive marketing advantages on campus, and allowed the lender to use the department's interns to disseminate its brochures.

Dowling ended the relationship with the company as part of its settlement of Cuomo's investigation.

Cuomo's investigation has resulted in settlements and reforms with 12 lenders - including Nelnet Inc., Citibank, Sallie Mae, JP Morgan Chase and Bank of America - and several colleges, with $13.7 million in payments made to a national education fund to help high school students and their families more wisely and safely apply for student loans.

Cuomo has said the U.S. Department of Education has had weak oversight of the student loan industry, a view supported Wednesday in a report by the investigative arm of Congress.

The Education Department is supposed to make sure banks that participate in the federal student loan program aren't giving schools or school officials anything of value in exchange for getting business at a particular school.

But the department has not sought out cases of improper conduct, according to the report by the Government Accountability Office. It found the department primarily responds to complaints, and doesn't even do a particularly good job of tracking those.

During the past 20 years, the department has only brought cases against two lenders, according to the report. More often, department officials have written letters to lenders asking them to stop acting improperly.

The department recently issued proposed regulations to try to limit abuses by lenders. Those could become effective next year.

Comments

Grundoon Luna 7 years, 5 months ago

I thought KU was a Direct Lending school and thus not involved in the FFEL program. When did it, if it did, change?

Godot 7 years, 5 months ago

The student loan scam is what has created Big Education. Big Education needs to be downsized, big time.

Wilbur_Nether 7 years, 5 months ago

Godot wrote "The student loan scam is what has created Big Education. Big Education needs to be downsized, big time."

I disagree. The most recent explosive growth in higher education was due to the GI Bill after WW2. Higher ed would be difficult to "downsize" without restricting access to elite groups.

When something becomes accessible to the masses, it necessarily becomes "Big."

compmd 7 years, 5 months ago

KU Athletics potentially involved in a scandal to make them a bunch of money? That would never, ever happen. Seriously. Never. Really.

Wilbur_Nether 7 years, 5 months ago

hawkperchedatriverfront wrote "That's a good one saying the explosive growth came after the GI bill of WWII."

Given that many higher ed organizations saw their enrollments triple (such as Syracuse and Michigan), I would suggest that it is historically accurate. Further, it's a very different thing to say that "anyone and everyone should go to college" than to say that any person who would be successful should have access. One of the problems that necessarily occurs when access is improved is that people go who would be better served in a vocational program. One of the problems of restricting access is that people who would be successful end up being stuck in vocational programs.

Which is worse?

Wilbur_Nether 7 years, 4 months ago

I neglected to support my assertions. Nearly 8 million WWII vets used the Bill. That's pretty explosive growth. http://www.gibill.va.gov/GI_Bill_Info/history.htm

Steve Jacob 7 years, 4 months ago

Andrew Cuomo has proven to be VERY tough on business. All this comes after the 6 years of banks writing the finance laws.

Bubarubu 7 years, 4 months ago

And since parents going to college is one of the stronger predictors of whether a child will go to college, the dramatic increase in enrollment following the GI Bill led to a snowball effect that leads to more and bigger campuses. 15 of the 23 California State system schools were founded after 1945, 10 of them between 1946 and 1960, just in time to handle the vets returning from WWII, Korea, and then their kids.

lunacydetector 7 years, 4 months ago

".......the athletic department did not have a direct relationship with University Financial Services."

what about indirect?

i'd like to see the credit card companies stop issuing cards to college students - so these kids learn how to save before they face the REAL world without $8-$10,000 in debt plus student loans....and what about that scam of prepaying for tuition? - that's a big ripoff.

i guess this means we'll get our taxes jacked up again - all excuses are credible when it comes to education.

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