College Loans & Cuomo

As mentioned in the preview post, The New York Attorney General, Andrew Cuomo, has released a statement regarding college education lenders and college athletic departments. Why does this matter to the average Alabama fan? Well, Cuomo’s news release mentioned 3 universities from the state of Alabama (Auburn, UAB, & North Alabama).

After doing so research, it has become quite apparent to me that one of Cuomo’s main goals as AG in New York is to sniff out every single unethical loan policy he can find. If you visit his site, you can find a stockpile of press releases, statements, and settlements regarding this topic. I won’t link every single one for you since would take up a good bit of space (I’m not joking, he’s very serious about this stuff, and has too many links to show on this blog). I’m starting to wonder if Cuomo has higher political ambitions in the next decade or so. Being the leader on this issue would be a HUGE feather in the proverbial cap for any politician.

But, back to this student loan story. I’m not sure that there will be anything juicy coming out about Auburn, UAB, or UNA athletics. But, then again, he did prove that the athletic director of Dowling College on Long Island received $75 for every new application, so you never know. I imagine every school on that list will make a deal sooner or later.

His goal is to either reimburse students for the cost of revenue sharing agreements between Universities and the lending companies, or have the companies and universities agree to his code of conduct and donate to his national fund regarding this matter. Let’s take a look at some of the settlements regarding the student loan industry the past year. The dollar figures next to the link represent the amount of money either donated to his fund, or the payments to students and their families:

• Settlement with Nelnet , The Nation’s 2nd Largest Loan Consolidator ($2 million)
• College Loan Corporation (CLC) And Cuomo Agree To A Deal ($500,000)
• Wachovia, National City Bank, and Regions Financial Corp. Agree to Abide by Code of Conduct ($ 3 million)
• Cuomo Brings College Loan Education Initiative To Capital (Student Bill of Rights)
• Cuomo Announces Agreements With Columbia University And The National Association Of Student Financial Aid Administrators ($1.125 million)
• Cuomo Announces Agreement With Wells Fargo
• Cuomo Announces Agreements With Drexel University & Capella University ($ 250,000)

Cuomo is basically trying to change the way every student loan company does business. His new Student Bill of Rights seems to be putting some pressure on the schools and companies to change their ways in order to save face. The Student Bill of Rights codifies Cuomo’s College Loan Code of Conduct, the basis for settlements with lenders and schools across the country. This latest move appears to be one of the biggest agreements he’s ever tried to pull off.

How does Cuomo do it? Well, for starters, he’s done his homework and has been calling organizations out regarding their practices:

1. Lenders pay financial kickbacks to schools based on a percentage of the loans that are directed to the lenders. The kickbacks are designed to be larger if a school directs more student loans to the lender. And the kickbacks are even greater if the schools make the lender their “exclusive” preferred lender.

2. Lenders pay for all-expense-paid trips for financial aid officers (and their spouses) to high-end resorts like Pebble Beach, as well as other exotic locations in the Caribbean and elsewhere. Lenders also provide schools with other benefits like computer systems and put representatives from schools on their advisory boards in order to further curry favor with the schools.

3. Lenders set up funds and credit lines for schools to use in exchange for schools putting the lenders on their preferred lender lists.

4. Lenders offer large payments to schools to drop out of the direct federal loan program so that the lenders get more business.

5. Lenders set up call centers for schools. When students call the schools’ financial aid centers, they actually get representatives of the lenders.

6. Lenders on preferred lender lists agree to sell loans to a single lender so there is actually no real choice for the student.

7. Lenders sell loans to other lenders, often wiping out the back-end benefits originally promised to the students without the students ever knowing.

If you haven’t noticed, most University officials always seem to scare easily when it comes to scandals and accusations of corruption. They are usually willing to settle, which– and I’m just taking a wild guess here– leaves the lending companies and banks out there all alone against Cuomo and his fight for the poor students. No company wants to LOOK heartless, so they are probably just as willing to agree to this Code of Conduct as well.

I expect this situation regarding AU, UAB, and UNA to be resolved in a few months if I had to guess. Cuomo’s movement is silently picking up more and more steam as he goes along. If he can get this massive list of schools to agree to his Code and Bill, it won’t be long until it becomes a nationwide law.

Stay tuned for more involving this matter.