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College Loan Scandal May Touch Many Schools

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College Loan Scandal May Touch Many Schools


College Loan Scandal May Touch Many Schools

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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The student loan scandal continues to expand. Two new schools have announced they are placing their financial aid directors on leave because of apparent conflicts of interests between those officials and the private lenders. New York Attorney General Andrew Cuomo, who started the probe, indicated today that it's not over yet.

NPR's Larry Abramson has more details.

LARRY ABRAMSON: Schools across the country are investigating their financial aid offices to see whether anyone has received payments or favors from lenders. Capella University, an online school, took action after learning that financial aid director Tim Lehmann serviced consulting fees from a lender.

Michael Offerman is Capella's president.

Mr. MICHAEL OFFERMAN (President, Capella University): As of this morning, Mr. Lehmann is on paid administrative leave.

ABRAMSON: Same story over at Johns Hopkins University in Baltimore, according to spokesman Dennis O'Shea.

Mr. DENNIS O'SHEA (Spokesman, Johns Hopkins University): We have put our director of student financial services on paid administrative leave pending an inquiry that we're doing into the circumstances of the payments that were reported by CIT Group.

ABRAMSON: CIT now owns Student Loan Xpress, the company that's been found to have paid large consulting fees to officials at top universities. At Hopkins, financial aid chief Ellen Frishberg received $43,000 in consulting fees from the lender.

Several schools have already signed a settlement with the New York Attorney General's Office to repay millions of dollars to students. New York Attorney General Andrew Cuomo says he keeps finding cases where the company essentially bought its way onto the school's list of preferred lenders.

Mr. ANDREW CUOMO (New York Attorney General): These are supposed to be lenders who are operating in the best interest of the students. Ninety percent of the students are following the recommendation of the college, 90 percent.

ABRAMSON: Cuomo's office would not rule out possible criminal charges. So far, he says, business laws barring deceptive practices clearly apply here. Cuomo also indicated he may be announcing more cases of conflict of interest in the days to come.

The scandal comes as students are increasingly dependent on loans to pay for the ever-rising cost of tuition. Capella University President Michael Offerman says it's a very competitive market.

Mr. OFFERMAN: In our review, what we've determined is that we've worked with over 150 different lenders.

ABRAMSON: And all are vying for a place on each school's list of preferred lenders, who get the vast majority of loans from students and families. Some financial aid directors have indicated their activity may fall into a grey area, but Dallas Martin, head of the National Association of Student Financial Aid Administrators, says that receiving large consulting fees clearly crosses his group's ethical guidelines.

Mr. DALLAS MARTIN (Director, National Association of Student Financial Aid Administrators): If it's proven true, then I would say yes, that this definitely is a conflict of interest and in my opinion would also not be good ethical behavior.

ABRAMSON: Members of Congress have taken up legislation that would eventually ban gifts from lenders, but the spotlight brought by the investigation is pushing lenders like CIT to clean house on their own right away.

Larry Abramson, NPR News, Washington.

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