A San Francisco-based firm paid kickbacks to Pepperdine University and other colleges to steer students to the company for their college loans, New York Atty. Gen. Andrew Cuomo alleged Thursday.
Education Finance Partners paid schools to be named to their “preferred lender” lists, but neither the company nor the schools properly disclosed the payments to students, Cuomo said.
Students were led to believe that lenders earned preferred designations by charging low interest rates, Cuomo said. But in reality, students ended up paying higher rates than necessary while other lenders charging potentially lower rates were denied access to students, he said.
“This is a widespread, industrywide practice and it’s gotten worse over the years,” Cuomo said at a news conference in his lower Manhattan office. “We’re saying ‘enough is enough. It’s got to stop.’ ”
In a statement, Tamera Briones, Education Finance Partners chief executive, denied wrongdoing and said she was “surprised and dismayed” by Cuomo’s allegations.
“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,” she said, adding that “we will continue to conduct ourselves with the highest business and ethical standards.”
Jerry Derloshon, Pepperdine’s director of public relations and news, said in a statement that the school was looking into Cuomo’s charges.
“With the best interests of our students always in mind, Pepperdine is committed to reviewing its practices relating to student loans and advised the New York State attorney general’s office that Pepperdine will work together with the attorney general concerning these important issues,” the statement said. “We are currently undergoing an internal review and will withhold making further comment until we have a better understanding of the issues of interest.”
Several of Pepperdine’s schools, including its business school, received payments from Education Finance Partners, according to a person familiar with the matter who spoke on condition of anonymity. Pepperdine received 0.5% of the loan amounts it had booked with the company, the person said.
Pepperdine is in the process of handing over documents to Cuomo’s office, the person said. Other schools, primarily those in New York that Cuomo initially focused on, have entered into settlement discussions with his office. Cuomo has not discussed a settlement with Pepperdine, the person said.
Cuomo gave Education Finance Partners five days to respond to his allegations before he files a lawsuit.
Cuomo described his move against Education Finance Partners as the first volley in an effort to eliminate abuses in the $85-billion student-loan industry. Last month, Cuomo asked more than 60 public and private schools nationwide for information on how they select lenders for preferred lists.
About 90% of students borrow money from lenders on preferred lists, according to Cuomo’s office.
Among the schools that took payments from Education Finance Partners, according to Cuomo, were: Baylor, Boston University, Clemson, Drexel, Duquesne, Fordham, Long Island University, St. John’s, Texas Christian, Washington University in St. Louis and the University of Mississippi. The company had agreements with more than 60 schools, Cuomo said.
Sen. Edward M. Kennedy (D-Mass.) also is asking several lenders, including Citigroup Inc., to turn over information showing whether they were involved in kickbacks.