NEW YORK - New York Attorney General Andrew Cuomo has shifted some of the focus in his investigation into the college loan industry and has began serving alumni associations with subpoenas.
Ninety alumni organizations are being asked the extent of their relationships with Nelnet, one of the nation's largest student loan consolidation companies.
"Unfortunately it appears that student loan scams don't end at graduation. Today we have taken the next step in bringing justice to students and former students who have been victimized by the college loan industry," Cuomo said. "Our latest action targets alumni associations across the country and their relationships with one of the nations' largest loan consolidators - Nelnet."
Cuomo is curious to see if the alumni associations received and failed to disclose payments from Nelnet for steering their members exclusively to it. Specifically, Cuomo is asking for:
-All documents pertaining to the criteria used for selecting student loan consolidator partners;
-All documents establishing how the relationship with Nelnet began;
-All documents which show whether the alumni association compared other loan consolidators' rates to those of Nelnet;
-All benefits given by Nelnet to any employee of the alumni association including meals, trips, gifts or other perks;
-All contracts between the alumni association and Nelnet or other lenders;
-All documents showing payments made by Nelnet; and
-All documents reflecting communication between staff of the alumni association and the related university or college.
Nelnet is a Nebraska-based company that has about 4,000 employees and more than $25 billion in net student loan assets.
"Our investigation seeks to put an end to kickback schemes and payoffs that benefit lenders and their partners -- be they schools or alumni associations -- at the expense of students trying to control their debt," Cuomo said.
Recently, the Slate (Student Lending Accountability, Transparency and Enforcement) Act was passed by the New York legislature. It is designed to protect college students who are prospective lendees from conflicts of interest in the student loan industry and modeled after Cuomo's College Loan Code of Conduct to which dozens of institutions have agreed.