Student loan probe expanded

The New York attorney general has expanded his investigation of the student loan industry by questioning whether borrowers are improperly steered to a lender that pays fees to alumni associations, including those for UC Riverside, UC Santa Cruz and San Jose State.

Atty. Gen. Andrew Cuomo on Thursday sent 90 subpoenas and letters to alumni associations across the country, seeking records about their dealings with Nebraska-based Nelnet, a leading provider of consolidation loans for students and graduates.

“Unfortunately, it appears that student loan scams don’t end at graduation,” Cuomo said in a statement. “We have taken the next step in bringing justice to students and former students who have been victimized by the college loan industry.”

Nelnet, however, said in a statement that the company has done nothing wrong and that its “affinity relationships” with alumni groups are beneficial to borrowers.

“We believe our agreements are appropriate and completely in accordance with the law,” the company said.

Officials at UC Riverside and San Jose State said they had no reason to believe the arrangements with Nelnet were improper.

“We are in the process of reviewing this [Cuomo] letter and determining what our next step will be,” said San Jose State spokeswoman Pat Harris.

Kyle Hoffman, a UC Riverside assistant vice chancellor who serves as executive director of the school’s alumni association, said the Nelnet loan program “is offered strictly as an alternative to our graduates.”

Hoffman said the organization entered an agreement with Nelnet after a “competitive process” that reviewed proposals from other lenders.

UC Santa Cruz officials could not be reached for comment. A spokesman for the UC system said it knew of nothing wrong with the Santa Cruz association’s relationship with Nelnet.

Cuomo’s office has spearheaded a multi-agency probe of the $85-billion financial aid industry. The investigation has focused on whether loan companies paid kickbacks to schools or financial aid administrators in exchange for placement on campus lists of preferred lenders.

Among those under scrutiny is USC financial aid director Catherine Thomas, who was placed on paid leave after disclosures that she obtained stock in the parent company of a lender.

In the letters and subpoenas issued Thursday, Cuomo’s office sought documents about Nelnet’s contracts with the alumni associations as well as information about any perks the lender might have extended to the groups and their officers, such as meals, travel and gifts.

Other associations that the New York attorney general is examining include those for the Juilliard School, Manhattan College, the University of Illinois, the University of Arizona and Colorado State University.

Generally, alumni associations are independent nonprofits, but they often have direct ties to schools and share staff members with them.

Nelnet, which has $25 billion in student loan assets, said it pays fees to about 120 alumni associations under marketing agreements.

paul.pringle@latimes.com