NEW YORK - Drexel University will be the first school to have a lawsuit filed against it in what is becoming a nationwide probe into student loan practices.
New York Attorney General Andrew Cuomo, the initiator of the trend, announced Thursday a notice of intent to sue Drexel, located in Pennsylvania, over its revenue sharing agreements with Education Finance Partners.
EFP was the first student lender to have a lawsuit filed against it by Cuomo. It and two others, Sallie Mae and Citicorp., have already settled with Cuomo by agreeing to pay $2 million each to a fund created to educate students about lending options.
The lenders also agreed to abide by Cuomo's College Loan Code of Conduct. Cuomo has said that his investigation has revealed inappropriate relationships between lenders and schools. He alleged that EFP was put on schools' "preferred lender" lists because it offered a cut of its profit to those schools.
New York, St. John's, Syracuse, Fordham, Pennsylvania and Long Island universities agreed to refund a total of $3.27 million to students earlier this month. Cuomo's also reached settlements with Salve Regina in Rhode Island, Pace University, Molloy College and the New York Institute of Technology.
Cuomo says Drexel has received more than $124,000 from its revenue sharing agreements with EFP and earned another $126,000 through March that has not been paid yet.
Drexel agreed to make EFP its sole preferred private loan provider in exchange for .75 percent of the net value of referred loans from EFP, Cuomo alleges.
"This investigation is a two-front battle: Lenders and schools," Cuomo said. "We have proceeded against lenders and now we are proceeding against schools. There is no reason for a school not to adopt the Code of Conduct.
"This office has been clear to schools: Settle or we will commence litigation."
Attorneys general Jerry Brown (California), Lisa Madigan (Illinois), Marc Dann (Ohio) and Lori Swanson (Minnesota) have also begun investigating the relationship between lenders