Private Lenders Face More Scrutiny On Student Loans
Yesterday, New York Attorney General Andrew Cuomo, ratcheting up a probe of the student-loan business, sent a letter to Education Finance Partners Inc., a San Francisco-based student-loan provider, saying that he intended to file a civil fraud lawsuit against the company. It would be the first of what New York officials expect to be many such actions.
Mr. Cuomo accuses the company of paying undisclosed kickbacks to schools for a spot on their coveted lists of "preferred lenders." He said as many as 60 schools have received such payments and named 12, including such well-known institutions as Boston University, Philadelphia's Drexel University and Pittsburgh's Duquesne University.
The payments, the state said, take the form of "revenue sharing" in which Education Finance Partners promises to pay back to the school a percentage of the loans it makes to students -- in one case, $100,000 a year, for a single school. Such arrangements can be against the interest of students and their families if the school is selecting the lender in order to receive the payments, instead of choosing another lender offering better terms.
March 23, 2007; Page B1
As colleges send out their acceptance letters for next fall -- and parents ponder how to pay the tuition bill -- university financial-aid offices and the loan companies that do business with them are under unprecedented assault from state and federal authorities.
Yesterday, New York Attorney General Andrew Cuomo, ratcheting up a probe of the student-loan business, sent a letter to Education Finance Partners Inc., a San Francisco-based student-loan provider, saying that he intended to file a civil fraud lawsuit against the company. It would be the first of what New York officials expect to be many such actions.
posted by Whitney Tilson at 11:31 PM
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