TRENTON, N.J. - New Jersey Attorney General Stuart Rabner recently served subpoenas on several organizations that deal with college loans, making him one of several state attorneys general who have followed New York Attorney General Andrew Cuomo's lead.
Rabner said Monday that he has subpoenaed 61 colleges and universities, the New Jersey Higher Education Student Assistance Authority and 17 student loan providers.
"It is unacceptable for the high cost of college to be compounded by student loan rates inflated by too cozy relationships between colleges and lenders," Rabner said.
"Our investigation was launched to determine whether colleges have been improperly steering students to preferred lenders that don't have the best rates. What we would hope and expect is that colleges maintain preferred lender lists only with students' financial interests in mind."
Since Cuomo announced his crusade against the industry, he has settled with dozens of colleges and universities, as well as the top four student lenders in the country. Also having appeared before Congress and championed legislation designed after his College Loan Code of Conduct, Cuomo's investigation has influenced attorneys general in several other states, such as Ohio and Illinois.
Lenders served with subpoenas include Student Loan Xpress, Sallie Mae, Wachovia Education Finance, Nelnet, Dollar Bank, Academic Management Services, Education Finance Partners, JP Morgan/Chase, and United Bank & Trust, EdAmerica, TERI, Citibank, Bank of America, Campus Door, College Board, AFC and Higher Education Solutions.
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, was put on schools' "preferred lender" lists because it offered a cut of its profit to those schools. EFP has since settled those allegations.
The subpoenas seek information on revenue sharing agreements, agreements to promote lenders, benefits schools and financial aid officers may have received, including direct payments, dinners, golf-outings, and travel expenses.
The subpoenas also seek information as to whether lenders' employees have provided direct assistance to financial aid offices, allowing these lenders to have preferred access to student loan borrowers.
"We will seek to determine whether students' interests have been harmed by any arrangements," Rabner said. "From the information we receive we should be able to assess what reforms may be necessary."