Student loan shakedowns spreading as Brown probes Cuomo victim

Legal News Line Apr. 18, 2007, 6:00am

Jerry Brown

The spreading feeding frenzy among state attorneys-general over probing links between colleges and student loan companies has officially gone national. And the attorney general who started the push is enlisting others across the country to broaden the probe into allegedly illegal kickbacks from student lenders to schools. California Attorney General Jerry Brown, in a rare press release yesterday, announced he had demanded from two California-based lenders documents referring to any financial links with the state's public or private colleges. Brown said the demand is part of a California Justice Department (CJD) investigation into the state's student loan industry. San Francisco-based Education Finance Partners, Inc. and San Diego-based Student Loan Xpress, Inc. have been ordered to produce records. "Schools and universities in California must be above reproach and no further burdens should be visited upon students who are already weighed down by escalating student-debt responsibilities," Brown stated yesterday. The search for links between universities and lenders began last month with New York Attorney General Andrew Cuomo. He announced a $2.5 million settlement Monday with Education Finance Partners and others last week of $2 million with Sallie Mae and Citigroup. Cuomo urged fellow attorney generals yesterday in a conference call with the 40-member National Association of Attorneys General (NAAG) to take up similar investigations in their own states, the AP reported. Last week two midwestern attorneys general announced Cuomo-style probes, LegalNewsLine reported. Illinois' Lisa Madigan and Minnesota's Lori Swanson were reacting to press reports linking some state schools financially to campus lenders. Brown's release yesterday said the CJD was investigating whether some schools "improperly chose" some lenders over others and also whether lenders made any "unlawful payments" to schools or their personnel. Participants at the NAAG conference call yesterday discussed investigating the various incentives - like trips, gifts and stock options - lenders use to join a college's "preferred lender" list.

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