Financial Aid Directors in California, New York and Texas Under Suspicion
When I was in college my greatest enemy wasn’t a rival frat, or Dean Wormer trying to get us thrown off campus. It was our Financial Aid office. Those guys always made me feel like a mook owing Tony Soprano money. Well maybe there is some gangster like activities going on at the old Financial Aid offices. Here’s an email the staff at the University of Texas received Thursday afternoon.
Lawrence W. Burt, associate vice president and director of student financial aid, has been placed on paid administrative leave pending the completion of an investigation into allegations of conflict of interest.
This action results from allegations made yesterday in a letter sent to me by the office of Andrew M. Cuomo, attorney general of the state of New York, that Mr. Burt received stock from Student Loan Xpress Inc., a company that is included on the university's preferred lender list.
It is important that the university ensure the integrity of its financial aid program and maintain unimpeachable practices on behalf of students and their families.
I have asked James R. Huffines, Chairman of the University of Texas System Board of Regents, and Mark G. Yudof, Chancellor of the University of Texas System, to authorize the Office of the General Counsel of the University of Texas System to conduct the investigation in collaboration with the university. The investigation will be led by Vice Chancellor and General Counsel Barry D. Burgdorf of the University of Texas System.
William Powers Jr.
President
The University of Texas at Austin
It seems that Mr. Burt isn’t the only one under investigation in this matter. David Charlow, executive director of financial aid at Columbia University and Catherine Thomas, associate dean and financial aid director at the University of Southern California are also on paid administrative leave due to this investigation. The Austin American-Statesman reports Mr. Burt saying he has done nothing wrong. He said he purchased the stock in 2001 for $1,000. He first listed Student Loan Xpress as a preferred lender for the 2002-03 school year ─ when he still owned the stock ─ because the company offered “a competitive product and good service, like every other lender on the list.” The New York Times reported he bought the stock at $1 a share and sold 1,500 shares at about $10 a share two years later and held 500 options on additional shares.
His story is similar to Mr. Charlow at Columbia, but not apparently as profitable. The New York Times reports Mr. Charlow sold 7,500 shares for about $10 each and held options on 2,500 more shares. Officials in the attorney general’s office said he had originally bought the shares for about $1 each. The officials said that Mr. Charlow sold additional shares ─ perhaps the result of exercising the 2,500 options ─ in 2005, and that he earned a total of more than $100,000 from all the sales. Student Loan Express was put on Columbia’s preferred lending list in 2005. Ms. Thomas hasn’t made a statement but the Los Angeles Times reports that she acquired 1,500 shares of stock in Student Loan Xpress; then-parent company, Education Lending Group.
This investigation isn’t only stopping at these three schools. The Austin American-Statesman wrote: In addition, Cuomo recently informed Education Finance Partners Inc., a San Francisco-based loan provider that is in the process of moving the bulk of its operations to Austin, that he intends to file a civil lawsuit against the company for a “revenue sharing” arrangement under which schools get a percentage of loans. He said as many as 60 schools have received payments, including Baylor University and Texas Christian University. Cuomo’s investigations haven’t escaped Washington’s notice. The New York Times reports that the Education Department is considering whether to regulate preferred lending list. They might also like to investigate one of their own officials Matteo Fontana. It’s reported he owned about $100,000 worth of stock in Education Lending Group. Mr. Fontana oversees all lenders and guarantee agencies that participate in the Federal Family Education Loan Program. Senator Edward M. Kennedy chairman of the committee on education along with his counterpart in the house Representative George Miller have requested information from lenders on their ties to universities.
The student loan business is an $85 billions dollar industry. The Los Angeles Times quotes Robert M. Shireman, president of the Institute for College Access & Success, a nonprofit advocacy group for disadvantaged students saying the highly lucrative and competitive financial aid business is rife with conflicts. “More and more student loan companies have found it in their interest to try to gain favor from financial aid offices at colleges and universities,” he said. “As much as we would like to believe that gifts and trips don not have an effect on the advice that financial aid offices provide to student, they, in fact, do have effects.”
This seems to be another problem in America’s financial institutions. With the problems with credit card debt, or the subprime crisis, this is another financial problem that is hurting the working and middle class. It seems a lot of this has roots in predatory policies, a problem I examined in my post “Giving Vultures a Bad Name”. It’s apparent the financial markets need to be cleaned up and regulated again before all these scandals and misdeeds drive this economy further down.
Lawrence W. Burt, associate vice president and director of student financial aid, has been placed on paid administrative leave pending the completion of an investigation into allegations of conflict of interest.
This action results from allegations made yesterday in a letter sent to me by the office of Andrew M. Cuomo, attorney general of the state of New York, that Mr. Burt received stock from Student Loan Xpress Inc., a company that is included on the university's preferred lender list.
It is important that the university ensure the integrity of its financial aid program and maintain unimpeachable practices on behalf of students and their families.
I have asked James R. Huffines, Chairman of the University of Texas System Board of Regents, and Mark G. Yudof, Chancellor of the University of Texas System, to authorize the Office of the General Counsel of the University of Texas System to conduct the investigation in collaboration with the university. The investigation will be led by Vice Chancellor and General Counsel Barry D. Burgdorf of the University of Texas System.
William Powers Jr.
President
The University of Texas at Austin
It seems that Mr. Burt isn’t the only one under investigation in this matter. David Charlow, executive director of financial aid at Columbia University and Catherine Thomas, associate dean and financial aid director at the University of Southern California are also on paid administrative leave due to this investigation. The Austin American-Statesman reports Mr. Burt saying he has done nothing wrong. He said he purchased the stock in 2001 for $1,000. He first listed Student Loan Xpress as a preferred lender for the 2002-03 school year ─ when he still owned the stock ─ because the company offered “a competitive product and good service, like every other lender on the list.” The New York Times reported he bought the stock at $1 a share and sold 1,500 shares at about $10 a share two years later and held 500 options on additional shares.
His story is similar to Mr. Charlow at Columbia, but not apparently as profitable. The New York Times reports Mr. Charlow sold 7,500 shares for about $10 each and held options on 2,500 more shares. Officials in the attorney general’s office said he had originally bought the shares for about $1 each. The officials said that Mr. Charlow sold additional shares ─ perhaps the result of exercising the 2,500 options ─ in 2005, and that he earned a total of more than $100,000 from all the sales. Student Loan Express was put on Columbia’s preferred lending list in 2005. Ms. Thomas hasn’t made a statement but the Los Angeles Times reports that she acquired 1,500 shares of stock in Student Loan Xpress; then-parent company, Education Lending Group.
This investigation isn’t only stopping at these three schools. The Austin American-Statesman wrote: In addition, Cuomo recently informed Education Finance Partners Inc., a San Francisco-based loan provider that is in the process of moving the bulk of its operations to Austin, that he intends to file a civil lawsuit against the company for a “revenue sharing” arrangement under which schools get a percentage of loans. He said as many as 60 schools have received payments, including Baylor University and Texas Christian University. Cuomo’s investigations haven’t escaped Washington’s notice. The New York Times reports that the Education Department is considering whether to regulate preferred lending list. They might also like to investigate one of their own officials Matteo Fontana. It’s reported he owned about $100,000 worth of stock in Education Lending Group. Mr. Fontana oversees all lenders and guarantee agencies that participate in the Federal Family Education Loan Program. Senator Edward M. Kennedy chairman of the committee on education along with his counterpart in the house Representative George Miller have requested information from lenders on their ties to universities.
The student loan business is an $85 billions dollar industry. The Los Angeles Times quotes Robert M. Shireman, president of the Institute for College Access & Success, a nonprofit advocacy group for disadvantaged students saying the highly lucrative and competitive financial aid business is rife with conflicts. “More and more student loan companies have found it in their interest to try to gain favor from financial aid offices at colleges and universities,” he said. “As much as we would like to believe that gifts and trips don not have an effect on the advice that financial aid offices provide to student, they, in fact, do have effects.”
This seems to be another problem in America’s financial institutions. With the problems with credit card debt, or the subprime crisis, this is another financial problem that is hurting the working and middle class. It seems a lot of this has roots in predatory policies, a problem I examined in my post “Giving Vultures a Bad Name”. It’s apparent the financial markets need to be cleaned up and regulated again before all these scandals and misdeeds drive this economy further down.
posted by kbear | 4:34 PM
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