Loan investigation reaches Georgetown

By:
08/24/2007

Georgetown University received a subpoena on August 1 from the New York Attorney General as part of an investigation into the relationship between university athletic departments and student loan lenders.

Forty colleges and universities, almost all with Division I athletic programs, were served subpoenas regarding their relationships with University Financial Services, a company that provides many students with college loans. Attorney General Andrew Cuomo’s office determined that the lender paid $75 to Dowling College in N.Y. for every loan application sent to them by the school’s athletic department, provoking a wider investigation.

Many of the schools who received subpoenas had links on official websites directing students to UFS’s website, often placed next to school colors, mascots and symbols. Such co-branding practices were widespread at Dowling College, and may suggest similar financial agreements at other colleges and universities.

“Students trust their University’s athletic departments because so much of campus life at Division I schools centers around supporting the home team,” Attorney General Andrew Cuomo said in a statement. “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.”

Georgetown spokesperson Julie Green Bataille confirmed that the university received a subpoena and will comply with the document request but would not otherwise comment.

Although experts in higher education policy and the financial aid profession have been aware of such conflicts of interest for some time, the scandal made headlines this spring after financial aid officers in high-profile schools such as Columbia and Johns Hopkins were revealed to have received cash payments and stock options for student loan company referrals, Michael Dannenberg, Director of Education Policy at the New America Foundation said.

“The failure of the Department of Justice to regulate and police over the last several years led state Attorneys General, most notably Cuomo, to fill enforcement,” Dannenberg said.

Cuomo’s investigation began in February and has already resulted in settlements with 26 colleges and universities, many outside the state.

Dannenberg asserts that these conflicts of interest among university officials can have a major financial impact on students.

“The average borrower takes out $20,000 in federal Stafford loans. Just one percentage point difference between lenders can equal approximately $1,000 in payments over the course of the loan,” Dannenberg said.

“Students have always assumed when they went to their financial aid offices, they were receiving the informed opinion from an unbiased source,” Danenberg said.

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Marco Cerna


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