As colleges continue to raise tuition prices, student loan companies around the nation have earned a special place in the education process. Though many of these companies do indeed help families to manage the exorbitant costs that universities now charge, there are some that seem to bend the rules in finding potential clients. New York Attorney General Andrew Cuomo is now targeting one such company.
On Thursday, Cuomo announced that his office intends to bring civil suit against a San Francisco-based loan company. Education Finance Partners (EFP) has attempted to give kickbacks to at least 60 colleges around the country in exchange for increased exposure and promotion by the universities to students.
Five of the colleges listed for accepting money from the EFP are located in Boston. According to officials at Boston University, the school received $1,500 from EFP over a period of two years and used the money to cover administrative costs. When the EFP asked them to sign a promotion agreement, however, BU refused.
Another Boston school linked to the company in question, Emerson College, has defended its financial aid practices, despite the fact that officials have not yet determined whether or not the school received any sort of financial rewards from the EFP. In the wake of Cuomo's probe, BU has returned the money.
Representatives for the EFP have vocalized their disagreement with the attorney general's choice to use the law as a means to settling the problem. In a statement to The Associated Press, EFP's Chief Executive Tamera Briones said, "We question whether the attorney general's office is seriously interested in learning all of the facts and whether there has been an actual violation of law." Interestingly, in another statement made to The Boston Globe last month, Briones defended the kickback policy by calling it a way to give back to communities, "so some families will have access to education."
The notice issued to the EFP on Thursday is the result of an investigation began by Cuomo in February to explore the practices of student loan companies. According to sources, Cuomo has allowed the company five business days to clarify reasons why they should not be sued. Should they fail to do so, it is expected that a lawsuit will be filed for the issuing of illegal kickbacks. Many see it as the first step in the fight against a new corruption between universities and loan companies.
The student loan industry is estimated to take in a staggering $85 billion a year. As many students depend on the student loans offered by these companies, people like Cuomo do not see preferential treatment gained through kickbacks as ethical or appropriate. Under the EFP's system, a college was given a percentage of the money made from loans in return for preferential treatment. For example, Cuomo's office explained that BU was supposed to receive .25 percent of the net value of its students' loans if the total value broke $1 million. That percentage would increase to .5 if the total value was $5 million and to .75 if it reached $10 million.
Whereas many colleges promote loan providers that offer the best opportunities to students and families, those that have dealt with the EFP pointed students toward a company that provided kick backs. Many collegese have increased the promotion of the EFP to gain greater rewards. Cuomo's office has even announced that it found cases of college financial aid officers receiving exotic vacation packages in exchange for their cooperation in leading students to choose the EFP for their student loans.
Whether Cuomo's office will allow the case to reach a courtroom rests on a possible EFP response to convince it to drop the lawsuit. With mounting evidence of faulty business practices, it appears nearly certain that the EFP will be sued and that Cuomo's investigation into similar companies and their arrangements with universities will continue. n
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