Student loan probe hits Ohio

Tim Magaw

Ohio Attorney General Marc Dann sent letters to university presidents across the state last week advising them of his plans to investigate whether financial aid administrators and other college officials have participated in unethical conduct with student loan companies.

Dann is following the lead of New York Attorney General Andrew Cuomo, who has led an investigation into the $85 billion student loan industry.

President Lester Lefton said this won’t be a problem for Kent State because the university doesn’t use third party lenders.

“We’re clean as a whistle,” Lefton said. “I’m sure at some universities, there are temptations to engage in behavior that is as not at the margin, but not at Kent State.”

Marc Evans, Kent State’s financial aid director, said in an e-mail that Kent State entered the Federal Direct Loan Program in 1995. Under this arrangement, the Federal Government is the lender and not the bank, savings and loan, or credit union. Evans’ responses were sent to the Stater by university spokesman Ron Kirksey.

Evans said in the e-mail because the federal and state financial aid programs have not kept pace with the increased cost of education, some families are using private educational loans to finance their education.

More than two years ago Kent State selected KeyBank and Citibank as preferred lenders through a request for proposal process.

“However, Kent State will process any private educational loan application such as Sallie Mae (student loan company) and doesn’t receive money for processing applications,” Evans said in the e-mail.

Evans said the university would comply with any request for information from the Attorney General’s office.

Cuomo’s investigation has revealed that some colleges have taken kickbacks from lending companies, such as paid trips and monetary gifts, for placing their companies on preferred lender lists.

“There is an unholy alliance between banks and institutions of higher education that may often not be in the students’ best interest,” Cuomo said in a statement on the New York Attorney General’s Web site.

In a letter Cuomo sent to 400 colleges and universities throughout the country, he revealed a list of “problematic practices” in the student loan industry, according to the office of the New York Attorney General.

One of the practices Cuomo states is that some lenders are offering kickbacks designed to be larger if a school directs more student loans to the lender. Lenders have also offered large payments to schools if they drop out of the direct federal loan program so lenders get more business.

Contact administration reporter Tim Magaw at [email protected].