Colleges and universities - traditionally held in high regard and respect
- have lost a bit of their luster in recent months as investigators continue to uncover the student lending scandal’s deep roots within our education system.
It seems even these ivy-shrouded, venerated institutions of higher learning are not immune from the kind of cronyism and backroom deal-making eschewed by good government groups and reform advocates.
The scandal started after a recent probe by New York Attorney General Andrew Cuomo’s office, which exposed unethical financial collusion between institutions of higher learning and student aid lending institutions.
In some circumstances, financial relationships were forged through lucrative - though unethical - revenue-sharing pacts that have seriously undermined colleges’ ability to remove bias from financial aid advisement operations. Lenders paid colleges a percentage of any business the schools sent their way.
As a result, of Cuomo’s inquiries, Fordham, St. John, Long Island and Pace Universities, New York Institute of Technology, and a few out-of-state institutions have all pulled the plug on lender revenue-sharing deals or other ethically questionable ties. Many schools will also pay restitution to students deliberately steered toward favored financial institutions.
Cuomo’s investigation continues, and many other colleges and universities are likely to face scrutiny. Lenders, too, have been implicated in the scandal, with many having agreed to sign codes of conduct and cut unseemly campus ties.
Clearly, we must do everything possible to prevent ethical lapses like these from continuing in higher education. Publicity won’t always be reason enough for the system to reform itself. Stronger oversight and stricter rules are needed, such as the “Student Lending Accountability Transparency and Enforcement Act” I recently sponsored in the Senate at Attorney General Cuomo’s request.
The bill, which passed the Senate on Wednesday, April 25 prohibits lenders from contributing money or gifts to colleges in exchange for favoritism (since students ultimately pay the price for such inducements - just as elderly prescription drug buyers ultimately absorb the high cost of pharmaceutical marketing and gifts to doctors dispensing medicine).
And yet, until last week, college-lender revenue-sharing agreements were perfectly legal in New York State.
One common mechanism colleges used for steering borrowers to favored loan companies is the “preferred lender” list schools sometimes share with students. On average, companies that make it on these lists end up siphoning as much as 90 percent of student loan business.
The “Student Lending Accountability Transparency and Enforcement Act” also brings transparency to “preferred lender” lists by requiring colleges to provide a written explanation of criteria used in generating these documents.
There is no questioning who the victims have been in this scandal. The fact that colleges and universities are paying restitution to students makes this abundantly clear. We owe it to young people to reform the system and bring pride back to our valued education institutions. This is a national scandal and New York State is, once again, in the forefront of education reform.
Senator Toby Ann Stavisky is the Ranking Democratic member on the Senate Higher Education Committee.
