Cuomo settles student loan probe
NEW YORK -- Last spring, as New York Attorney General Andrew Cuomo and his office embarked on a nationwide probe of the $85 million student loan industry, several licensing relationships between loan consolidators and college athletic departments piqued the investigators' interest.
In particular, a "revenue sharing" deal between Student Financial Services Inc. of Clearwater, Fla., and Dowling College, a Division II school in Oakdale, N.Y., led the investigators to subpoena SFS and other schools for information regarding the contracts.
After a four-month investigation, Cuomo found that 63 schools, including 57 NCAA Division I athletics departments such as Georgetown, UCLA, Pittsburgh, Rutgers, Alabama, Virginia Tech, Wake Forest and Florida State, had "co-branding" relationships with SFS. The arrangements allowed the company -- in exchange for a fee of about $15,000 per school and a payment of between $75 and $100 for each student who applied -- to use the schools' logos, colors and mascots in marketing student loans.
"This was one of the most saddening things to see for NCAA schools," Cuomo told SI.com after announcing a settlement Tuesday in which SFS agreed to end what Cuomo called a "kickback scheme" with the schools. "The schools were selling access to their students' loyalties. The loan consolidators were really wolves dressed in sheep's clothing, looking to fleece the students."
Cloaked in school colors, branded with team logos and ostensibly posing as a student loan arm of the academic institutions, the companies mainly marketed their offerings at athletics events under the banner of "University Financial Services." Employees wore team-related gear and even named the loans after mascots, such as the "Go Hoyas!" loan at Georgetown.
"You see the school colors, you see the school logo ... you think you're dealing with the school. Your suspicion index comes down," Cuomo said at a news conference. "The schools are actually using their imprimatur to -- unwittingly at best -- deceive the student."
Though no financial penalties were levied on the schools or SFS in the settlement, the loan consolidator will take out a full-page advertisement in each of the participating schools' student newspapers to warn against such predatory direct marketing.
In addition, the company has signed a code of conduct agreement, which prohibits lenders and marketers from buying rights to a college or university's name, colors, logo or mascot.
"These acts were both egregious and fraudulent," said Cuomo, who is pushing the Congress and the federal government to introduce stronger student loan legislation. "The athletic departments presented the easiest forum for the loan companies because students are excited about teams. They took advantage of the students' trust in their schools."