AP: NY AG Targeting TCU's Athletics in Student Loan Probe

[dcpony]

Associated Press
NY's Cuomo expands student loan probe to athletic departments
August 1, 2007

ALBANY, N.Y. — New York Attorney General Andrew Cuomo is now investigating whether top college athletic departments nationwide — including those at Auburn University, Ohio University and Texas Christian University — steered student athletes to education lenders in exchange for kickbacks.

Cuomo said Wednesday that he served 39 universities with subpoenas and requests for documents about deals between athletic departments and Student Financial Services Inc., which operates as University Financial Services. He said he's looking at how team names, mascots and colors were used to suggest the company was the college's preferred lender.

"Students trust their university's athletic departments because so much of campus life at Division I schools centers around supporting the home team," said Cuomo. "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."

Cuomo began the investigation as an outgrowth of his national probe of student loan providers and college administrators, which he said uncovered a pattern of favoritism for lenders who provided kickbacks, "revenue sharing" plans, and trips and other gifts in exchange for designations as recommended lenders. Sometimes the colleges provided campus employees to staff telephone banks for lenders drumming up business.

Cuomo's findings led to state and national reforms.

"Today's action is an important new step as we continue to examine the unethical conflicts that pervade the student loan industry," Cuomo said.

Spokesmen for Auburn, Ohio, and Texas Christian universities didn't immediately respond to requests for comment. The loan company couldn't immediately be reached for comment.

Cuomo said that during his first investigation, he found the athletic director of Dowling College on New York's Long Island entered into a revenue sharing agreement with University Financial Services that paid the college $75 for every new loan application, exclusive marketing advantages on campus, and allowed the lender to use the department's interns to disseminate its brochures.

Dowling ended the relationship with the company as part of its settlement of Cuomo's investigation.

Cuomo's investigation has resulted in settlements and reforms with 12 lenders — including Nelnet Inc., Citibank, Sallie Mae, JP Morgan Chase and Bank of America — and several colleges, with $13.7 million in payments made to a national education fund to help high school students and their families more wisely and safely apply for student loans.

[Cadillac]

Cuomo said Wednesday that he served 39 universities with subpoenas and requests for documents about deals between athletic departments and Student Financial Services Inc.

Uh-Oh.

-CoS

[35straight]

Please be guilty. Please be guilty. Please be guilty.

[FroggieFever]

I think I'm a smart guy, but dang, that took a lot to get through--I didn't understand half of what he was saying.

Though, this is a post from someone who works in the division at TCU:

This investigation is mostly a crock. Unconscionable financial aid directors at a handful of schools, including UT, took advantage of the situation to press for personal goodies like free trips to Europe. But the overwhelming majority treated the revenue-sharing plan as a straight business deal that added to their financial aid bottom line.

In TCU’s case, the so-called "kickbacks" amounted to a paltry $6,000 per year, which was annually divided as need-based scholarships for two additional students. In fact, most schools working through University Financial Services similarly documented the revenue share and awarded it back to students as financial aid. So the most significant thing Cuomo has accomplished is to reduce the number of students receiving need-based grants-in-aid, which don’t have to be repaid. Our hero.

The legal reforms coming out of this mess are not a bad thing, but they’re addressing a "problem" that, for the most part, wasn’t really a problem. TCU and others listed preferred lenders based not just on revenue-sharing, which benefited students, but also attractive interest rates and repayment terms, which also benefited students. So students weren’t really being gypped out of anything. Plus, there’s no rule requiring students to use university-preferred lenders. They’re entirely free to shop around and get the best deal they can anywhere they can find it.

Though they know they’re innocent of any wrong-doing or ethical lapse, most schools are simply settling with Cuomo rather than mount a long and expensive legal defense. Initially, his asking price for settlement was $2 million. At the last minute, he upped it to $3 million, smugly saying, "I came up with that number while I was shaving this morning."

Actually, it was a little more calculated than that. The cost to mount a decent legal defense in this case has been averaged at about $2.5 million per school. So Cuomo knows that any settlement offer in that ballpark is going to be very attractive to the institutions he has targeted.

In short, this is little more than a sleazy extortion scheme designed to penalize the innocent along with the guilty. It enriches New York state coffers, strokes Cuomo's monumental ego, and keeps his crusading name in the paper for future political capital.

[Corp]

Geez, that's a pretty far reach for even a sleazy liberal SOB like Cuomo.

Really sad!

[Junior]

At least they weren't giving kids burgers or Tide.

Then they'd REALLY be in trouble.

[Grider]

It's burgers and "Cheer." Regardless, jtstang must be pleasantly surprised that you brought it up.

[jkflamebo]

will some giant program plz be exposed and punished already

[FroggieFever]

will some giant program plz be exposed and punished already

If you read the article, TCU is not subject to any punishment. The lending company is.

[Cadillac]

will some giant program plz be exposed and punished already

If you read the article, TCU is not subject to any punishment. The lending company is.

I heard from a guy who works on the grounds at TCU (interestingly enough an NTCC Professor), and he said that Gary Patterson was co-signing all the loans for the Football players.

Also, he would touch them inappropriately.

-CoS

[FroggieFever]

will some giant program plz be exposed and punished already

If you read the article, TCU is not subject to any punishment. The lending company is.

I heard from a guy who works on the grounds at TCU (interestingly enough an NTCC Professor), and he said that Gary Patterson was co-signing all the loans for the Football players.

Also, he would touch them inappropriately.

-CoS

Woah.

[regis]

What's more unsettling?

1) That the froggies are named in this business?

2) That the AP refers to tcu as a "top college athletic department"?

It sends shivers down my spine...

[mrydel]

What's more unsettling?

1) That the froggies are named in this business?

2) That the AP refers to tcu as a "top college athletic department"?

It sends shivers down my spine...

Arkansas State is included in the "top college athletic departments" that are involved. You can judge their standards by that.

[bubba pony]

don't take Cuomo lightly. he already exposed fraud and if the froggies have nothing to hide, open up your books and prove it.

[FroggieFever]

don't take Cuomo lightly. he already exposed fraud and if the froggies have nothing to hide, open up your books and prove it.

We have.

Cuomo's just trying to up his name. The only people at fault here are the lending agencies, not TCU, mind you.