USC’s chief of financial aid quits

USC’s longtime financial aid director is leaving the post in the wake of allegations that she violated the school’s conflict of interest policies by acquiring stock in a lender recommended to students.

Catherine Thomas will retire effective today, nearly two months after she was placed on paid leave as a result of her dealings with the former parent company of Student Loan Xpress.

Thomas, who held the job since 1990, had become a subject of a New York-based investigation into whether financial aid officers steered students to lenders in exchange for discounted stock and other inducements.

New York Atty. Gen. Andrew Cuomo’s probe has triggered broader inquiries into the $85-billion student loan industry by Congress and the U.S. Department of Education.

The investigations are ongoing, as is an internal review by USC of its financial aid operations. A campus spokesman has said no students were harmed by Thomas’ stake in Student Loan Xpress, which USC has removed from its list of preferred lenders.

Thomas had acquired and sold about $14,000 worth of stock in the parent firm, Educational Lending Group, according to Cuomo’s office. Investigators have said they believe that she and officials at other schools obtained the shares at a discount.

Reached by phone Thursday, Thomas declined to answer questions about her departure. “Give it a few days,” she said.

In other developments Thursday, the Federal Trade Commission said it has launched an investigation into allegedly deceptive marketing tactics by student lenders, including two in San Diego, and Cuomo’s office reached loan-related ethics agreements with New York’s Columbia University and a national financial aid association.

Rep. George Miller (D-Martinez) requested the FTC examination after complaints that lenders had attempted to scare students about looming interest rate increases and used letterheads that resembled official government stationery.

Miller cited two examples of such letters from College Debt Corp. and Education Loan Funding. Representatives of the two firms could not be reached Thursday.

Columbia will adopt a code of conduct for financial aid operations and allow Cuomo’s staff to monitor them, and it will pay more than $1 million into an education fund. The university recently fired its financial aid director because of his receipt of stock in the Student Loan Xpress firm.

The National Assn. of Student Financial Aid Administrators also agreed to adhere to a more specific ethics policy, Cuomo’s office said.

“It’s been a good day,” said Cuomo spokesman Jeffrey Lerner. “There’s kind of a growing movement among universities and student lenders to really clean up the financial aid process.”

Since the investigations began, the University of California and California State University systems have ordered reviews of their financial aid policies.

In addition, Cuomo’s office has questioned whether borrowers have been improperly directed to a lender that pays fees to alumni associations, including those for UC Riverside, UC Santa Cruz and San Jose State.

UC officials said Thursday that the Riverside and Santa Cruz associations would disclose to members the details of any relationships with lenders.

A San Jose State spokeswoman said she believed its association was considering a similar policy.

paul.pringle@latimes.com