WASHINGTON, D.C. - New York Attorney General Andrew Cuomo took his investigation of student lenders on the road today, testifying before the House Committee on Education and Labor.
During his statement, Cuomo said he has been troubled by what he has unearthed during his probe into the industry, which has resulted in several settlements and a couple of lawsuits.
I am angered and saddened to say that our investigation has revealed an unholy alliance between lenders and many trusted institutions of higher education," Cuomo said. "The best interests of the lender and
the institution, rather than the interests of the student, all too often have become paramount."
He also stated that he believes the Department of Education is partly to blame for allowing, what he believes, relationships between student loan companies and universities that are improper.
"In terms of the Federal government's responsibility in this arena, let me say that having run a federal agency myself for eight years, I am not quick to criticize. I believe in this case, however, the Department of Education has been asleep at the switch," Cuomo said.
"My investigation has shown that even where the DOE regulations did exist with respect to the (Federal Family Education Loan) program, there is significant evidence suggesting these regulations were flouted. For example, one school my office investigated had a preferred lender list of four FFELP lenders, without disclosing that one of the lenders had an agreement to purchase the loans placed by the other lenders on the list. The State University of New York had a college which required students to pick a particular FFELP lender as their Stafford lender.
"That was a clear violation of federal law under which a student is assured a choice of any lender. Another school chose FFELP "preferred lenders" by considering how much each lender contributed to sponsor the school's programs or events. We have also found conflicted arrangements between Columbia University and FFEL lenders where student financial aid officers obtained stock of one of the FFELP preferred lenders."
Cuomo also said the country's third- and fourth-largest student lenders, JP Morgan Chase and Bank of America, have agreed to adopt his Code of Conduct. Sallie Mae and Citicorp, the nation's largest and second-largest student lenders, have already taken that step.
Cuomo has said that his investigation has revealed inappropriate relationships between lenders and schools. He alleged that Education Finance Partners, against whom he filed his first lawsuit and with whom he recently settled, was put on schools' "preferred lender" lists because it offered a cut of its profit to those schools. EFP has since settled those allegations.
Before Congress, he offered several solutions, led by his promise to continue investigating until his Code of Conduct is accepted across the country. He also said he would like to see state legislation passed relevant to his cause and more state attorneys general join in his fight.
He also urged Congress to enact the Student Loan Sunshine Act.