Colleges Agree To Reforms
Monday, April 23rd 2007, 2:30 pm
By: News On 6
ALBANY, N.Y. (AP) _ Three colleges agreed Monday to change how they recommend lenders on campus and one of them will reimburse students $88,000 to settle a probe into the student loan industry.
Washington University in St. Louis, DeVry University in Oakbrook Terrace, Ill., and Career Education Corp. of Hoffman Estates, Ill., agreed to a code of conduct to protect students from kickbacks paid to colleges by lenders in exchange for steering students their way.
Career Education Corp., a for-profit college based in Hoffman Estates, Ill., with campuses in Illinois and New York state, agreed to pay $21,000 into a government fund that helps educate parents and students about college loans, said New York Attorney General Andrew Cuomo, who has led a probe into loan arrangements that he says favored banks and schools, not students.
The $21,000 was the amount of donations made by private lenders to the Career Education Corp.'s scholarship fund, Cuomo said during a joint conference call with the attorneys general in Illinois and Missouri.
Washington University in St. Louis ended a revenue sharing agreement with Education Finance Partners of California in 2006 that would have provided revenue for the university if it led more students to the company, said Missouri Attorney General Jay Nixon.
The University denies it violated state law and said it never received payments.
``Only three loans totaling less than $25,000 were issued by EFP to three university students during the one-year period of the agreement,'' according to Washington University's statement. ``The code of conduct's core value, the primacy of the student's interest, has always been at the heart of the university's practices.''
DeVry ended a similar agreement in 2005 after one year and will pay $88,000 to students who borrowed money during that time from Citibank, which has already agreed to a $2 million settlement with Cuomo.
Illinois Attorney General Lisa Madigan said she was unsure how many students will be reimbursed.
Under the code penned by Cuomo's office, schools are obligated to end all revenue sharing agreements with lenders and provide full disclosure of ties to loan companies.
``I think the tide is turning now,'' Cuomo said. ``If a school says it hasn't signed on to the code of conduct, I think that then a prudent student starts to ask questions.''
Last week, Cuomo enlisted the support of state attorneys nationwide to investigate practices in the student loan industry. He is scheduled to testify about his findings before a congressional committee next week.
It was the latest development in a nationwide probe of the $85 billion student loan industry that began under former state Attorney General Eliot Spitzer.
A number of lenders and schools have already settled lawsuits and adopted the code of conduct.