Midwest attorneys-general follow Cuomo's lead on lender links
SPRINGFIELD -- Illinois Attorney General Lisa Madigan has begun investigating possible financial links between all the state's colleges and its student loan providers after recent revelations at two public universities.
And her counterpart in Minnesota, Lori Swanson, said yesterday she has subpoenaed records to check similar links between lenders and college employees after reports of improper payments at a well-known school.
Their investigations could mirror recent probes by New York Attorney General Andrew Cuomo into agreements between state schools and private lenders. As a result, six schools in New York have agreed to reimburse some students over $3 million.
The announcement by Madigan's office follows a report in yesterday's Chicago Tribune revealing extensive ties between Chicago State University (CSU), on the city's south side, and Seaway National Bank.
Two senior CSU officers are bank directors - CSU's trustee is Seaway's board chairman and largest shareholder - and Seaway is one of five recommended lenders that gain 96 percent of CSU loans. Seaway's CSU customers jumped from 134 in 2005 to 420 in 2006, the year it returned to CSU's list, the Tribune noted.
One day earlier, Western Illinois University (WIU) revealed that student lender Nelnet had paid the 13,400-student school to steer loans to the company. Officials said WIU has netted $4,800 from Nelnet, which is now the school's largest private lender, the AP reported.
Madigan's head of consumer protection, Deborah Hagan, told the Tribune her staff was "trying to move quickly" on the schools-lenders probe. "We are looking to see whether the things uncovered in New York are happening in Illinois," she said.
Minnesota attorney general Lori Swanson is now doing the same, she told Minnesota Public Radio (MPR) yesterday. Swanson said she was investigating whether any of the state's college financial aid officers have received payments from loan companies in return for sending them business.
Her probe follows an announcement earlier this week that a financial aid officer at Capella, a well-known Minneapolis-based online university, had received $12,000 in "consulting fees" from lenders.
"When you have people owning significant amounts of stock in lending institutions who make the preferred vendor list, or you have people who have a dual relationship ... that's kind of extensive and serious and troubling," Swanson said.
None of Illinois' 11 other public universities have received any compensation for steering business to lenders or placing them on "preferred lists", the Chicago Sun-Times has reported. Several colleges contacted by MPR also denied any deals with lenders.
The U.S. student loan market is worth $85 billion, mostly in the form of private loans subsidized by the federal government.
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