An ongoing investigation into the student loan industry has turned up a number of higher education executives and top officials who accepted money from and owned stock in loan companies, various news sources reported this week.
A general manager in the Department of Education’s Office of Federal Student Aid, Matteo Fontana, was put on administrative leave Friday after conflicts of interest were turned up.
Documents from New York Attorney General Andrew Cuomo’s investigation into the student loan industry showed that Fontana owned and sold more than $100,000 worth of stock in Student Loan Xpress, at a time when his Department job required him to oversee lenders.
Fontana sold 10,500 shares of the company’s stock in 2003, at a time when it was valued at approximately $10 per share. After placing him on leave, the Department sent his case to its inspector general for further review.
The Secretary of Education, Margaret Spellings, has also asked for the resignation of another official from an advisory committee on federal student aid.
Lawrence Burt, also the director of financial aid at the University of Texas, had also owned and sold shares in the parent company of Student Loan Xpress, documents from the investigation show. The loan company is also on UT’s list of preferred lenders. UT has since suspended Burt.
Ellen Fishberg, the director of student services at Johns Hopkins University in Baltimore, was also put on leave after the investigation showed she received money from Student Loan Xpress.
Several news sources reported that the company paid for $22,000 of Fishberg’s graduate school tuition and gave her more than $40,000 in fees and travel expenses. Student Loan Xpress was put on Johns Hopkins’ preferred lender list shortly after the payments were made.
David Charlow, the associate dean of student affairs at Columbia University in New York, was suspended by the university last week after a New York Times report that he also owned and sold more than $100,000 worth of stock in the loan company.
The same happened at the University of Southern California, where Director of Financial Aid Catherine Thomas was also put on leave. She was believed to have owned 1,500 shares of Student Loan Xpress’ parent company at a time when it was on the school’s preferred lender list.
The company has since been stricken from the list and USC’s vice provost said, in a letter to the campus community, that an “internal review” was being conducted into Thomas’ actions.
In the wake of these allegations, CIT Group Inc., the parent company of Student Loan Express, also suspended three of its top officials: Chief Executive Mike Shaut, President Fabrizio Balestri and Vice Chairman Robert deRose.
John Ryan, chancellor of the SUNY system, sits on the board of CIT. He received approximately $150,000 in payment and benefits from CIT, in addition to his $300,000-plus salary as chancellor. Ryan told The New York Times that he did not believe there was an inherent conflict of interest between the two positions.
In the wake of the investigation, New York’s state university system is one of several universities that has pledged to follow a set of rules created by the attorney’s generals office.
These rules mandate universities disclose why certain loan companies are on preferred lender lists and they ban universities from accepting gifts or other perks in exchange for any advantages, including spots on the preferred lists.
Cuomo’s office has also indicated the investigation will spread and that more university officials will be subpoenaed.
