Fri, Sep 05, 2008

Tucson Region

College-loan inquiry touches UA

Industry tie with Alumni Assoc. under scrutiny
By Eric Swedlund
arizona daily star
Tucson, Arizona | Published: 05.05.2007
An arrangement between the UA Alumni Association and a student-loan consolidation company has come under the scrutiny of New York's attorney general as a new part of an ongoing probe into the college-loan industry.
Attorney General Andrew Cuomo's office is investigating links between college alumni associations and one of the country's largest loan consolidation companies, Nelnet.
Seeking to find out whether any associations received and failed to disclose payments for steering their members exclusively to the company, Cuomo has subpoenaed or requested information from 90 colleges.
"Unfortunately it appears that student loan scams don't end at graduation," Cuomo said in a prepared statement.
"Today we have taken the next step in bringing justice to students and former students who have been victimized by the college loan industry."
On Thursday, the UA received a letter from Cuomo's office, asking for the Alumni Association to provide any documents relating to agreements made with Nelnet, a Nebraska-based company that offers former students consolidation of their federal or private student loans. Cuomo contends it has more than $25 billion in net student loan assets.
Nelnet has been an "affinity partner" of the UA Alumni Association for the last five years, said John Lacy, a board member of the Alumni Association.
Under the relationship, Nelnet is listed on the association's Web site, providing the company with advertising and access to the association's alumni members. In turn, the association receives revenue for its scholarship program, Lacy said.
The Alumni Association is organized as a private nonprofit company separate from the university, and confidentiality provisions in its agreement with Nelnet prohibit disclosing how much money is involved, Lacy said. The association will cooperate fully with Cuomo's request.
"All in all, it's not a great deal of money, but I'm not at liberty to talk about it," Lacy said. "Certainly no individual within the Alumni Association gets anything."
Lacy defended the agreement, saying alumni don't pay any more if they approach Nelnet directly instead of through the association. Alumni are free to deal with any company, he said, and the association selected Nelnet because the company offered a good deal.
"What we're dealing with is, this is a loan consolidation program that's offered to the U of A alumni," Lacy said. "We're confident that there's nothing improper with the relationship, and we feel that it's a good program and that our alumni have benefited from it, and we've had no complaints about it."
Cuomo's high-profile investigation of the student-loan industry had been limited to arrangements between colleges and lenders regarding the origination of loans. This new angle extends the probe to people interested in consolidating loans after college.
"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.
The investigation identified dozens of schools that accepted payments from the $85 billion student-loan industry, and Cuomo has called on the schools to halt the practice.
Sallie Mae, the country's largest student-loan provider, last week agreed to a $2 million settlement with Cuomo, and 22 schools have agreed to follow a new code of conduct.
Cuomo has threatened Arizona State University with a lawsuit over its agreement with San Francisco-based Education Finance Partners to share revenue from private student loans.
The University of Arizona has no formal or informal revenue-sharing agreements with lenders.
Last month, Arizona Attorney General Terry Goddard announced his own probe into whether college student loans in the state were mishandled in violation of the law, issuing civil investigative demands to at least two student loan businesses he declined to identify.
● Contact reporter Eric Swedlund at 573-4115 or at eswedlund@azstarnet.com.