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August 30, 2007

Pitt info requested in student loan probe

The New York State Attorney General’s office continues to broaden its review of the relationships between universities and their vendors, requesting or subpoenaing information from schools, student loan firms and study abroad providers.

Student loans

Pitt is among 40 schools that received information requests or subpoenas as part of a widening investigation into the relationship between college athletic offices and student loan providers.

An Aug. 1 press release issued by New York State Attorney General Andrew M. Cuomo stated that his office is seeking information on whether the schools’ athletic departments received kickbacks from student loan provider Student Financial Services, Inc., doing business under the name University Financial Services (UFS), in exchange for promoting its loans to students. The office is investigating whether athletic departments evaluated UFS interest rates before recommending their federal loans, or if their endorsement was based purely on payments from the lender.

The latter would be considered revenue sharing, which is a violation of federal law as well as New York consumer protection laws, according to the attorney general’s office. The office also is examining whether the use of team names, mascots, colors and logos imply that UFS is a school’s official lender.

“Students trust their university’s athletic departments because so much of campus life at Division I schools centers around supporting the home team,” Cuomo stated. “To betray this trust by promoting loans in exchange for money is a serious issue, especially when Division I schools already generate tremendous revenue from their student-athletes.”

The attorney general gave the schools an Aug. 14 deadline to provide all documents relating to agreements between their athletic departments and UFS or other lenders.

Among the papers requested were any showing payments made by UFS, those reflecting how and why UFS was chosen as the athletic department’s recommended lender as well as whether the department compared UFS’s rates to other lenders and information related to the marketing of loans by athletic departments on behalf of UFS. In addition, the office requested documentation reflecting communication between staff of the athletic associations and the related university or college, including emails and documents of any benefits given by UFS to any employee of the college, including meals, trips and other perks.

Pitt spokesperson John Fedele said “We responded appropriately and in a cooperative manner and to date have not heard anything further.”

Betsy Porter, director of Pitt’s Office of Admissions and Financial Aid, said OAFA was not contacted in the investigation, which focused on athletic departments. Pitt’s athletic department referred all questions to Public Affairs.

Porter said OAFA does not recommend lenders to students, noting that those choices typically are family decisions. Nor is OAFA in the business of providing preferred lender lists, she said. An alternative loan lender list that appears on the OAFA web site is made up of lenders who are able to electronically exchange information and disbursements with the University, Porter said.

Pitt was the only Pennsylvania university from which the attorney general’s office requested documents. Others receiving subpoenas (which went to private institutions) or document requests (which went to public institutions) were: Arkansas State, Auburn, Bowling Green State, Central Michigan, Colorado State, East Carolina, Florida Atlantic, Georgetown, Georgia State, Howard, Indiana State, Marquette, Ohio, Oregon State, Rutgers, Southern Illinois, Texas Christian, Tulane, Alabama-Birmingham, Central Florida, Detroit Mercy, Houston, Kansas, Louisville, New Orleans, North Alabama, Oregon, South Florida, Texas-San Antonio, Texas-El Paso, Texas-Pan American, Wayne State, Wright State and Youngstown State as well as California State-Sacramento, Georgia Tech, Tennessee Tech, UCLA and North Carolina-Greensboro.

The inquiry springs from a previous investigation that revealed Dowling College’s athletic director had entered into a revenue-sharing agreement with UFS in which UFS agreed to pay Dowling $75 for every loan application directed to them via the school’s athletic department. According to the attorney general, Dowling’s athletic department agreed to post links to UFS on its web site and distribute UFS promotional materials in order to steer students towards UFS loans and gave the lender permission to market its loans throughout campus. As part of its settlement with the attorney general, the Dowling athletic department agreed to terminate its relationship with UFS.

Study abroad

Five study-abroad providers were subpoenaed Aug. 15 as the attorney general’s office intensified its scrutiny of higher education to include a look into the financial relationships between colleges and third-party study-abroad vendors.

The attorney general’s action came on the heels of an Aug. 13 New York Times article on the perks some study abroad providers give schools who use their services.

The five that received the initial subpoenas — The American Institute for Foreign Study, Butler University’s Institute for Study Abroad, Arcadia University Center for Education Abroad, Institute for the International Education of Students and the Danish Institute for Study Abroad — are listed on Pitt’s Study Abroad office web page as Pitt-related affiliates (as opposed to Pitt-developed programs or exchange programs) among dozens of options for Pitt students.

Study Abroad office director Annagene Yucas did not return a call from University Times seeking comment. Pitt’s Fedele said the University had not been contacted by Cuomo’s office with regard to the study abroad issue.

Incentives paid by the study abroad industry apparently are not uncommon. An Aug. 23 article in The Chronicle of Higher Education cited a July survey of 60 U.S. college study abroad offices by international study program provider Cultural Experiences Abroad. According to the Chronicle, the survey found that more than half of the responders who use outside study-abroad providers said their school’s programs have financial connections with program providers.

The survey was conducted a month before the New York State attorney general subpoenaed the five study-abroad providers.

The Chronicle reported that the survey found 54 percent of respondents who use third-party providers agreed with the statement, “My study-abroad provider provides monetary support to help run my office,” and that 10 percent listed “referral affiliate benefit packages” among the top three factors in choosing a provider.

—Kimberly K. Barlow

Filed under: Feature,Volume 40 Issue 1

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