Students to be paid back in settlement

A settlement with three dozen schools and a major lender announced Monday will make the student loan process fairer to students and their families, New York Atty. Gen. Andrew Cuomo said.

As part of the settlement, six schools agreed to reimburse students a total of $3.27 million, Cuomo said, and Citibank, which does business at about 3,000 schools, agreed to donate $2 million to a national fund created to educate students and parents about the financial aid industry.

All 29 four-year State University of New York campuses along with New York University, the University of Pennsylvania, St. John’s University, Syracuse University, Fordham University, St. Lawrence University and Long Island University agreed to abide by the code as part of a settlement.

The agreements are part of a nationwide probe into student lending by Cuomo’s office. None of the schools admitted wrongdoing.

“The college-loan industry has developed practices over the years that we believe are deceptive. We believe they’re unethical. We also believe they’re illegal at times,” Cuomo said.

Cuomo’s investigators say they have found numerous arrangements that benefited schools and lenders at the expense of students. In some cases, investigators said, lenders provided all-expenses-paid trips to exotic locations for college financial aid officers who directed students to the lenders.

Six lenders and more than 100 public and private colleges have been swept up in the attorney general’s investigation of the $85-billion college loan industry. An investigation continues into practices at schools and lenders that were not part of the settlement, Cuomo said.

The agreement bans lenders from giving gifts to schools in exchange for advantage in landing loan business. College officials will be prohibited from taking gifts of more than nominal value from lenders and will be prohibited from receiving compensation for serving on advisory boards at private loan companies, Cuomo said. Revenue sharing is prohibited.

The schools must also make clear to students the criteria used to place lenders on a preferred list and advise students that lenders not on the list are also available.

The code of conduct “is setting a standard as to what is and isn’t acceptable practice,” said Mark Kantrowitz, publisher of the website FinAid.org.

The University of Pennsylvania will pay $1.62 million to reimburse students. New York University will return $1.39 million, and Syracuse University, Fordham University, Long Island University and St. John’s University will pay lesser amounts.

Cuomo recently said he would sue California student loan provider Education Finance Partners, claiming that the company was making illegal kickbacks to schools in exchange for business. The company said it did nothing wrong.