KU denies illegal lending

University says investigation of athletic dept. is misguided

New York Attorney General Andrew Cuomo is now investigating whether major college athletic departments – including Kansas University – steered athletes and other students to an education lender in exchange for kickbacks.

A key KU official said Wednesday there is nothing to the allegation and that the school will cooperate fully in any kind of probe.

“Had they done their homework, they would’ve been able to understand the issues and receive very plausible explanations,” said Jim Marchiony, KU associate athletic director.

Marchiony denied any impropriety and said he was miffed that Cuomo contacted the media before talking with KU officials.

“We were blind-sided,” he said.

The dispute is over Cuomo’s allegation that some universities have improperly led students to take out student loans from Student Financial Services Inc., which does business as University Financial Services.

Cuomo served 39 universities with subpoenas and requests for documents asking for information about the relationships between the athletic departments and UFS.

Marchiony said Cuomo faxed a request for information Wednesday to KU Chancellor Robert Hemenway.

Marchiony said the KU athletic department has an indirect relationship with UFS that has no impact on how the department does business.

UFS is one of seven advertisers at the bottom of the home page of KU athletics’ Web site that link to commercial sites. The page to which the ad links states, “University Financial Services is a proud sponsor of KU Athletics and is not affiliated with the KU Financial Aid Department.”

The athletic department contracts with Host Communications, which pays a fee to KU for KU’s athletics media rights. Host Communications sells corporate sponsorships. One of those sponsorships is with UFS, Marchiony said.

“So they (UFS) have a deal with Host Communications, not Kansas athletics,” Marchiony said.

“Kansas athletics does not receive one penny from UFS based on the number of loan applications UFS receives from Kansas students,” he said.

“Kansas athletics doesn’t give names of future, current or past students to UFS,” he said. Marchiony did note that the athletic department does approve the corporate sponsorships.

Scholarship factor

Baseball coach Ritch Price said student loans weren’t an issue with his team.

Some schools, Price said, offer baseball players partial scholarships. KU is not one of them.

“At a private university, where it can cost $35,000 and baseball offers a 50 percent scholarship, the parents are still trying to find $17,000, $18,000 to go to school,” Price said. “The school puts together a package – a grant and a loan. : There are programs that will sign 23, 24 guys and give them partial scholarships. But we’re not one of those programs. We don’t just give books to guys. We give maximum dollars to get big-time players.”

In other words, Price’s players don’t need loans.

And if a potential walk-on needed a loan?

“I have no part in that process,” Price said. “I don’t recruit those guys.”

Price himself attended college on a partial baseball scholarship. His college, Willamette, was, like Kansas, a direct-lend school.

“I had a loan when I went to school,” Price said. “I had a baseball scholarship, some work-study scholarship money and a loan. But I just signed the papers they gave me.”

Suggestive moves?

Cuomo 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.”

In a written statement issued late Wednesday, University Financial Services said: “The relationships between our company and athletic departments of various colleges and universities are part of our generalized marketing efforts, the same as advertising at any sporting event, and do not involve the financial aid departments of the schools involved. … UFS supports the student loan code of conduct and plans to fully cooperate with the New York attorney general’s office.”

Part of wider probe

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.

During that probe, KU officials consistently denied engaging in such practices. No allegations against KU surfaced in that probe.

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.

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 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.

In May, the Kansas Attorney General’s Office sent out questionnaires to state universities inquiring about student-lending practices to determine whether the kinds of kickbacks Cuomo uncovered are happening here. There has been no follow-up report.

“We’re trying to determine how lenders get onto ‘preferred lender lists,’ who’s on them … and if there are any situations where there is compensation or gifts,” Ashley Anstaett, a spokeswoman for Attorney General Paul Morrison, said then.

KU officials maintain that the school doesn’t have any “preferred lenders” and participates in the federal direct-lending program, in which students get loans directly from the federal government.

Other schools involved

Meanwhile, Cuomo said Wednesday he was also looking at athletic departments at Auburn, Texas Christian University and Ohio University.

Ohio University spokeswoman Sally Linder said the school received a subpoena and will cooperate with Cuomo, as it did in a student loan probe by the Ohio Attorney General’s office. She declined further comment until the university’s lawyers review the subpoena.

“We feel confident what we are doing is above board,” Linder said.

Auburn athletics spokesman Kirk Sampson said the university has no preferred provider of student financial aid.

“However, the Auburn Athletic Department will thoroughly examine and respond to any suggestion that the university’s name, logo or any representation of it has been used improperly in connection with specific lenders,” Sampson said.

A representative of Texas Christian University didn’t immediately respond to requests for comment.

Marchiony said KU would cooperate with Cuomo.

“I don’t think we have what he thinks we have,” he said.