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College loan scandal deepening

By ASSOCIATED PRESS
Published April 11, 2007

ALBANY, N.Y. - Cozy arrangements between colleges and the companies that lend their students billions of dollars are far more widespread than anticipated, New York Attorney General Andrew Cuomo told the Associated Press Tuesday, just as two more college financial aid officers were suspended amid a probe into the $85-billion industry.

Cuomo would not divulge where the burgeoning investigation is headed next, including whether more subpoenas are on the way. But he said the investigation could lead to criminal charges against high-ranking officials at both lending companies and universities.

"This is like peeling an onion," Cuomo said. "It seems to be getting worse the more we uncover. It's more widespread than we originally thought ... more schools and more lenders at the top end.

"We have demonstrated this is not just the exception," he said. "This is the rule."

Cuomo is investigating alleged kickbacks to school officials who steered students to certain lenders. His investigators say they have found numerous arrangements that benefited schools, financial aid officers and lenders at the expense of students.

So far, six schools - the University of Pennsylvania, New York University, Syracuse University, Fordham University, Long Island University and St. John's University - have agreed to reimburse students a total of $3.27-million for inflated loan prices caused by revenue sharing agreements, Cuomo said. The schools will return money to students who took out loans during the time the revenue sharing agreement was in effect. Students will be refunded based on the amount they were loaned.

A number of student loan officials at different schools have also been placed on leave pending the investigation.

On Tuesday, Widener University in Pennsylvania placed Walter Cathie, the dean of financial aid at Widener, on leave. Capella University, a Minneapolis-based online school, said it suspended its director of financial aid after he acknowledged accepting consulting fees from Student Loan Xpress.

[Last modified April 11, 2007, 02:25:13]