New York Suspects Student-Loan Kickbacks

By CHAD BRAY

New York Attorney General Andrew Cuomo said an investigation by his office has revealed widespread, questionable financial arrangements among student-loan providers and a number of colleges and universities, including kickbacks to some schools.

Mr. Cuomo said his inquiry has uncovered practices by lenders that, at a minimum, create questionable conflicts of interest with schools and could be illegal under the state's consumer-protection law.

The practices include paying kickbacks to schools based on a percentage of loans directed to a lender, paying for trips to resorts for financial-aid officers, and setting up funds or lines of credit for schools in exchange for being placed on preferred-lender lists.

Such practices can drive up the cost of loans to students and limit their choices of lenders, Mr. Cuomo said.

"Preferred student loans often mean preferred for the school at the expense of the student," he said.

The attorney general said his office is "actively investigating" the student-loan practices at 100 public and private colleges and universities inside and outside of New York and has sent letters to more than 400 schools, urging them to end questionable relationships with lenders.

Mr. Cuomo didn't name any of the schools involved, but they include Ivy League institutions, his office said. Mr. Cuomo said his investigation is continuing, but his office hasn't reached the point of pursuing enforcement actions against the lenders or any schools.

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