NEW YORK (Legal Newsline) - As part of his broad investigation into the student loan industry, New York Attorney General Andrew Cuomo announced Tuesday that Emerson College has agreed to return $780,000 to students.
An investigation by Cuomo's office discovered that Emerson's financial aid office and its former Director of Student Financial Services, Daniel V. Pinch III, were engaged in conflicts of interest and deceptive practices, Cuomo said.
The suit claimed that the parties had an arrangement with student loan provider Collegiate Funding Services, Inc., in which Pinch agreed to provide consulting services in return for a monthly fee of at least $1,500 per month. Pinch received approximately $36,000 from CFS. Emerson fired Pinch during the investigation.
It further alleged that Emerson's financial aid office encouraged students to use lenders from Emerson's "preferred" lender list, which provided Emerson's financial aid staff with expense-paid trips to resorts, free meals, tickets to professional sporting events, and payments for attending lender advisory board meetings.
In addition, Emerson's preferred lenders provided Emerson with a variety of free and discounted goods and services, including temporary staffing, printing services, donations and software, the suit says.
"When we began our investigation into Emerson College, a list of the activities that were carried out by their financial aid office and former director could have served as a list of exactly what a school should not do," Cuomo said.
"Their financial aid office put personal preferences for expense-paid trips and free giveaways over the best financial interests of their students. The director of financial aid was even getting paid thousands of dollars from one of the lenders the college was recommending to students.
"With this agreement, Emerson has changed its practices to better serve its students, and I am pleased to resolve this investigation."
The investigation also revealed that Emerson entered into a revenue sharing arrangement with Education Finance Partners, a private student loan provider, and received a percentage of loans made to Emerson students without disclosing the relationship to its students, Cuomo said.
Under terms of the settlement, Emerson will pay over $780,000 to more than 4,000 students and graduates, including approximately $81,000 to 400 New Yorkers. Emerson also agreed to adopt Cuomo's student lending Code of Conduct, which prohibits schools and financial aid officials from accepting payments or services from student lenders in exchange for placement on the schools' preferred lender list.