UT System tightens rules for financial aid offices, student lenders
August 2, 2007
On Wednesday, New York Attorney General Andrew Cuomo announced that his investigation was expanding to include athletic departments at 39 colleges and universities nationwide, accused of steering student athletes to certain lenders in exchange for kickbacks. Texas schools on the list include Texas Christian University, the University of Houston, UT-San Antonio; UTEP and UT-Pan American.
Written by Katie Humphrey, Austin American-Statesman
The University of Texas System is curtailing gifts from student loan lenders at its 15 campuses statewide, mirroring a move made by the flagship UT-Austin campus in a May agreement with Texas Attorney General Greg Abbott.
A letter sent by UT Chancellor Mark Yudof and Vice Chancellor and General Counsel Barry Burgdorf to campus presidents Tuesday asked them to put in place by Sept. 30 the procedures outlined in the Texas Higher Education Fair Lending Practices Agreement.
The agreement with the state was signed by UT-Austin after the university fired its financial aid director, Lawrence Burt, amid a nationwide investigation by the New York attorney general. It bars gifts from lenders worth more than $20 and outlines policies for maintaining a list of preferred lenders. The agreement did not cite UT for wrongdoing or assess punishment.
Colleges and universities statewide are being asked to consider the practices outlined in the agreement, said attorney general spokesman Tom Kelley. The agreement could also be used as a guide for private colleges and universities, Kelley said.
The UT System chose to extend the agreement at all campuses now in order to "exhibit leadership" on financial aid practices, according to the letter, and to be prepared in case portions of the agreement ever become mandatory.
"We feel like it's the right thing to do to be out in front on this issue," Burgdorf said in an interview Wednesday.
Financial aid offices nationwide have been under scrutiny since New York Attorney General Andrew Cuomo launched his investigation of the student loan industry. Cuomo's investigation originally focused on financial aid officials who favored certain lenders in exchange for kickbacks, revenue-sharing plans, free trips and other gifts.
On Wednesday, he announced that the investigation was expanding to include athletic departments at 39 colleges and universities nationwide, accused of steering student athletes to certain lenders in exchange for kickbacks. Texas schools on the list include Texas Christian University, the University of Houston, UT-San Antonio; UT-El Paso and UT-Pan American.
Cuomo said he's looking at how team names, mascots and colors were used by Student Financial Services Inc. to suggest preferred lender status.
An internal investigation by UT-Austin this spring revealed that student lenders provided the financial aid office with treats, including cake, candy bars and meals at local restaurants.
Burt was fired after the investigation showed that he had violated campus and UT System policies when he invested in a company and placed its student lending subsidiary, Student Loan Xpress Inc., on the university's list of preferred lenders. Burt has denied wrongdoing.
Joe Pettibon, assistant provost for financial aid at Texas A&M, said he was familiar with the UT-Austin agreement.
"I honestly suspect it will become kind of a standard across the state for best practices," Pettibon said.
khumphrey@statesman.com; 445-3658
STUDENT LENDING INQUIRY TIMELINE
April: New York attorney general sends letter to University of Texas-Austin officials, questioning financial aid director Lawrence Burt's investments. Burt is placed on paid leave. UT System stops using preferred lender lists.
May: UT-Austin fires Burt for violating policy. UT-Austin signs the Texas Higher Education Fair Lending Practices Agreement composed by the Texas attorney general's office.
June: U.S. Education Department proposes standards for universities that ban marketing practices that result in loan company payoffs to university officials.
July: U.S. Senate passes legislation that would cut subsidies to federally guaranteed loans and use the money to increase the amount available for Pell grants. UT System extends agreement with Texas attorney general to all campuses statewide.
- Additional material from The Associated Press.
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