UNL's Perlman: New York AG's student loan investigation is a 'political adventure'
By staff and wire reports
Friday, Mar 16, 2007 - 04:58:24 pm CDT
University of Nebraska-Lincoln Chancellor Harvey Perlman on Friday called a New York Attorney General’s Office investigation into student loan agreements a “political adventure.”
New York Attorney General Andrew Cuomo said Thursday an investigation he began last month into the $85 billion student loan industry found numerous arrangements made to benefit schools and lenders at the expense of students.
Cuomo’s office is investigating at least six lenders: the nation’s largest student-loan provider SLM Corp. — commonly known as Sallie Mae; Nelnet Inc of Lincoln.; Education Finance Partners Inc.; EduCap Inc.; the College Board; and CIT Group Inc. Cuomo said he notified more than 400 colleges and universities nationwide, including all in New York State, they should end what he called deceptive practices.
Perlman acknowledged that UNL was one of the universities from which Cuomo had asked for information and documents.
Cuomo said he is actively investigating at least 100 schools. He would not divulge which schools were being investigated.
Cuomo said his investigation has found that many colleges have established questionable “preferred lender” lists and entered into revenue sharing and other financial arrangements with those lenders. Some colleges have “exclusive” preferred lender agreements with the companies.
While not illegal, Cuomo says such arrangements are deceptive and anticompetitive. He told The Associated Press that alleged kickbacks he has uncovered could be illegal.
There have been no criminal charges or civil suits filed yet.
“There is an unholy alliance between banks and institutions of higher education that may often not be in the students’ best interest,” Cuomo said. “The financial arrangements between lenders and these schools are filled with the potential for conflicts of interest. In some cases they may break the law.”
In the process, students have been denied their choice of lender, or faced difficulty using that lender, hurting their chances of getting better loan terms, the attorney general said.
UNL and Nelnet signed a deal in 2004 that gives Nelnet first crack at lending money to UNL’s graduate and professional students. In exchange, the university gets up to $600,000 back from Nelnet, which it plans to use primarily to aid to low- and middle-income students.
Under the terms of the agreement, students are under no obligation to acquire a loan through Nelnet, Perlman said.
Nelnet spokesman Ben Kiser pointed out that the company won a competitive bid for the UNL contract and was given no preferential treatment.
Cuomo said he has the authority to conduct a nationwide investigation because schools from across the country recruit students from New York.
Perlman scoffed at that notion.
Under that assumption, “a state attorney general could investigate anybody for anything,” Perlman said.
He said UNL gave Cuomo only documents that anyone would be entitled to under state public records laws.
Perlman said graduate and professional students at UNL covered by the deal with Nelnet have plenty of loan choices, while undergraduate students, who use the government’s direct program have no choice.
“I regard this (investigation) as more a political adventure than a criminal investigation,” Perlman said.
The student loan companies said they are cooperating with Cuomo’s office.
“We’re cooperating fully and believe this is a great opportunity to discuss the things we’re doing to help students and families,” Nelnet’s Kiser said.
Tom Joyce, a spokesman for Sallie Mae, said his company was cooperating with Cuomo’s office, and he denied participating in any of the practices being investigated.
Joyce said preferred lender lists increase competition and help drive down the cost of loans while helping students sort out the complex web of financial aid. He noted that many private-sector lenders are now offering rates below the rate set by the federal government.
He said Sallie Mae has never paid any kickbacks to schools, nor has it flown financial aid officers to exotic locations. The company has flown financial aid officers only to places like Wilkes-Barre, Pa., and Killeen, Texas, so they could view the company’s student loan processing centers, Joyce said.
George Pappas, spokesman for EduCap, said his company was supporting Cuomo’s “effort to investigate these collusive practices.”
“What I get out of it is parents and students should shop around and try to get the lowest interest rates and we fully support that,” said Abraham Lackman, president of the Commission on Independent Colleges and Universities. “As long as the college is just giving recommendations and not requiring students to use a particular lender, I don’t see anything wrong with it.”
Journal Star reporter Matt Olberding and the Associated Press contributed to this report.
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