A burgeoning investigation by the New York attorney general into financial partnerships between the nation's universities and student-loan companies they endorse enveloped UT-Austin Wednesday.
Student Loan Xpress is listed as a preferred lender on the University's Web site, and in September 2003, Associate Vice President and Director of Student Financial Services Lawrence Burt owned 1,500 shares of Education Lending Group Inc.'s stock, according to Securities and Exchange Commission records for that month. Student Loan Xpress is a subsidiary of Education Lending Group Inc.
Burt denied Wednesday any correlation between the shares he owned and Student Loan Xpress's position on UT's preferred lender list, stating that he purchased the shares before the Education Lending Group formed Student Loan Xpress.
An investigation by New York Attorney General Andrew Cuomo, which began last year, revealed that dozens of universities have accepted numerous financial incentives from the $85-billion-per-year student-loan industry. In February, Cuomo requested information from more than 60 public and private universities pertaining to the standards they use to determine which lenders they recommend to students.
Burt said he bought 1,000 shares and was given 500 options. He said he sold the shares in 2003, but is unsure of exactly how much he made. At that time, the stocks would have sold for about $14,000, at $9.50 per share.
Burt also sits on an advisory board that provides strategic advice for Student Loan Xpress. The New York attorney general's Web site states that in the investigation, one problematic practice is that lenders have also put university officials on their advisory boards.
However, Burt also serves on financial-aid advisory committees for the U.S. Department of Education, Texas Guaranteed Loan Corporation and other lenders.
UT Vice President for Student Affairs Juan Gonzalez said he will lead an internal review process into the matter.
"We are very concerned about any allegations of impropriety regarding our preferred lender list in our Student Financial Services office," Gonzalez said in a written statement. "We will be reviewing very closely exactly how 'preferred lenders' are selected."
Burt said that because of the investigation, the University should be concerned, but he doesn't expect any improprieties with the University to the found. "Frankly, I've never had a student say that we directed them to a lender that didn't serve their needs," Burt said.
Burt said he doesn't know of any financial-aid officer that has taken financial incentives from student-loan companies for their own benefit, but he does know of other institutions who took additional revenues from companies and turned them into grants. He said the University doesn't do this.
"The University of Texas lender list, the way we put it together, is a leader in how to do things the right way," he said.
Burt said UT used more than 150 lenders last year and encourages students to look for the best lender for their particular needs. The University provides a preferred lender list, because those lenders have worked with local guarantor agencies, their money can be moved electronically, and financial aid officials feel confident they can resolve any problems that should arise with those lenders, he said.
Student Loan Xpress accounts for only 4 percent of UT's student loan volume, he said. Cuomo's office said it sent a subpoena Tuesday to Student Loan Xpress.
"The focus of Student Loan Xpress, Inc. is to market to the financial aid offices of schools in order to be included on that school's preferred lender list," according to the Education Lending Group's prospectus in the September 2003 SEC report. "Student Loan Xpress, Inc. is currently on the preferred lender list at over 380 schools, and it is anticipated that amount will grow to well over 450 by the end of 2003."
Cuomo's office sent letters to UT and the University of Southern California and a subpoena to Columbia University Wednesday. Student Loan Xpress is listed as a preferred lender at each school.
David Charlow, the associate dean of student affairs at Columbia University, owned 7,500 shares of Education Lending Group's stock and owned 2,500 stock warrants at the time of the stock prospectus. The school has placed Charlow on leave and is investigating the matter, according to Columbia spokesman Robert Hornsby.
Some of the financial incentives student loan companies have offered university officials include computer systems, all-expense-paid trips for financial-aid officers and their spouses to high-end resorts, and large payments to schools to drop out of the direct federal loan program, so that the lenders get more business, according to the New York Attorney General office's Web site.
Additional reporting by The Associated Press.
Be the first to comment on this article!