N.Y. Student-Loan Investigation Focuses on Athletics

New York Attorney General Andrew Cuomo renews his investigation of the student-loan industry with new subpoenas aimed at the athletic departments of several dozen colleges and universities.

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And let's talk next about an investigation in New York, where the state Attorney General Andrew Cuomo is looking at the student loan industry. He's issued new subpoenas aimed at the athletic departments of several dozen colleges and universities. Cuomo says he's investigating whether student athletes were steered toward particular lenders in exchange for kickbacks.

NPR's Jim Zarroli reports.

JIM ZARROLI: Cuomo's office has issued subpoenas and document requests to 40 universities that participated in a program run by the student loan company University Financial Services. The university athletics departments would agree to promote the company's loans at games and on their Web sites. Benjamin Lawsky of the attorney general's office says some universities even allowed the company to use its mascot and logo in ads.

Mr. BENJAMIN LAWSKY (Deputy Counselor and Special Assistant, Attorney General of New York): The athletic departments at those schools have enormous power. And when they start promoting particular products and particular lenders to their students, that does, we have found, have a real impact.

ZARROLI: Lawsky alleges that the athletics departments would get paid for the promotions. One small Long Island school, Dowling College, has already acknowledged it got $75 for every loan application it referred to the company.

Mr. LAWSKY: There's a chance that that's a deceptive practice, because at the end of the day, what the student's not being told is there's a Georgetown Hoya lender not because they're best for the students but because money is being paid by the lender to the school.

ZARROLI: This investigation grew out of an earlier one by the attorney general, in which he documented the series of financial ties between university admissions offices and student lenders. Some university officials were given gifts and trips in exchange for referrals. Among the schools named in this latest phase of the investigation was Southern Illinois University. School spokesman Roy Seaver(ph) said the school entered into a contract last year with University Financial Services.

Mr. ROY SEAVER (Spokesman, Southern Illinois University): And part of the contract called for us to promote and distribute their flyers and their promotional materials, which our athletics department did at football games. They'd put the flyers out on a table at the football games, and after about the third game they found that no one was taking these flyers.

ZARROLI: Seaver said the school ended the program without getting any money from the lender and never gave it any preferred treatment. The lender was also a sponsor of the University of Kansas athletics program. But Associate Athletics Director Jim Marchiony says the money went to a separate company that manages the university's corporate sponsorships and gets a flat fee for its services.

Mr. JIM MARCHIONY (Associate Athletics Director, University of Kansas): Kansas athletics doesn't refer students or student's athletes to USS or any other loan company. And if the attorney general's office had called to ask that, they would have found that out.

ZARROLI: Marchiony said the university would cooperate with the investigation, as did the lender itself. Meanwhile, a new report from the general accounting office says the Department of Education needs to increase its oversight of the student loan business. Department officials say they already have taken some steps to stop lenders from offering illegal inducements to schools, but they also say their authority to oversee lenders is limited.

Jim Zarroli, NPR News, New York.

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