September 5, 2008

Cuomo Reported to Be Planning New Student-Loan Lawsuit and Agreements

After a silence of several months, New York’s attorney general, Andrew M. Cuomo, is putting a fresh public focus on the matter of student lending.

Mr. Cuomo’s office is preparing a lawsuit against one student-loan company, Goal Financial, and is nearing agreements with about a dozen other lenders concerning their marketing tactics, The New York Times reported today.

Goal Financial has been a leader in consolidations, the Times reported. Consolidations are the single large loans that borrowers seek after college to combine all the federally subsidized loans they accumulated as students.

Investigators found that Goal employed tactics that included gifts such as iPods for borrowers who applied for federal loans, incentives for students who persuaded their classmates to apply, and misleading advertising, the Times said, citing an unnamed “senior official” in Mr. Cuomo’s office.

Last year Mr. Cuomo described such improper behavior as widespread in the industry, persuading dozens of lenders and colleges to pay millions of dollars in settlement costs and to sign agreements to halt such practices.

The attorney general is close to agreement with “about a dozen” more loan companies over their marketing tactics, the unidentified official told the Times. Officials at both Goal Financial and Mr. Cuomo’s office did not return calls seeking comment. —Paul Basken

Comments

1. Sue ‘em all.

   — kgotthardt    Sep 5, 03:31 PM    #

2. Absoutely chase them all out of business then ask why there are no student loans.

   — hawkeye    Sep 5, 03:45 PM    #

3. Why should student lending be privatized to begin with?

   — Thomas    Sep 5, 04:42 PM    #

4. Go get ‘em Andrew. You’re on the same track as Eliot.

   — seth    Sep 5, 04:46 PM    #

5. Why SHOULDN’T it be privatized? You don’t go to the government for a mortgage, car loan, personal loan or credit card, why have them do student lending? Liberals are laying the foundation for a complete government takeover where they will have a monopoly and make billions off the students.

   — JR    Sep 5, 05:23 PM    #

6. Cuomo is a “Spitzer.” The media is indulging him just as they did Spitzer. I hope he gets his comeuppance just as Spitzer did. They are both bullies.

   — Lou    Sep 5, 05:32 PM    #

7. Can’t agree more hawkeye. Let all the private lenders go under. We’ll shift everyone to Direct Lending and watch as it buckles under the strain. We’ll all have fun experiencing delays in disbursements. It’s a hoot working with students who are struggling to eat while they wait for their loan proceeds. I personally enjoy long conversations with upper level administrators explaining why accounts receivable are so out of whack. Reconciliation with bad data is fun fun fun. And when the lack of capacity spawns the need to expand the administration of the program, and farm out the servicing functions to multiple private vendors, we’ll all enjoy seeing the cost of the program increase, undercutting the argument that Direct Lending is the cheaper of the programs to taxpayers. I’m just disappointed that my political party doesn’t get this.

   — Hoover    Sep 5, 05:33 PM    #

8. I wonder how his inquiry of pay-backs for international education is coming? And what’s next?

   — Anon    Sep 5, 06:10 PM    #

9. There is room for everyone. The unethical can continue their association with lending companies and the ethical can continue their association with Direct Lending.

   — Woody    Sep 5, 09:59 PM    #

10. It shouldn’t be a debate over FFELP vs DL. We’ve been there before. It should be about serving students. As I watched both conventions and their celebrations being “sponsored” by various organizations, I couldn’t help but ask myself how is that ok while sponsored events at financial aid conferences are not? I also wonder where this country will be in 10 years when my children are making their way in the world…will there be loans? Will the federal deficit be too overloaded with student debt to allow them to borrow? Who’s watching out for student defaults? It seems everyone is so bogged down with their own personal agendas, including Cuomo, that they have totally forgotten about the students— the children of today who will be leading our country tomorrow.

    — students need a voice    Sep 6, 08:36 AM    #

11. Cuomo’s efforts are small potatoes compared to what he really could do with some seismic legislation. #5, Mortgages, car loans, etc. are private, but the price that caused this debt was the same for everyone. The last time you went shopping for a home, did you have to fill out a financial aid form informing the seller how much you could afford and then did the seller assume that you could afford almost 50% of your annual earnings to meet the mortgage and set the price that way?

    There definitely needs to be more clarity on how much middle class (and do I say “upper” middle class) families are expected to pay annually for college and less talk about how nobody pays “sticker” price. One would be surprised how untrue this is.

    — JAS    Sep 8, 06:24 AM    #

12. to JR: The republican conservative government is taking over mortgage loans (Fannie Mae, Freddie Mac)

    — regulator    Sep 8, 07:38 AM    #

13. #12, Do you see the same issues in price/affordability repeating themselves in terms of the price to attend college? As with home prices, should the market perform and college tuition decrease?

    — JAS    Sep 8, 08:50 AM    #

14. The Federal Government isn’t going to do a better job of handling student loans than a free market economy will. Cuomo’s watch dog role is warranted in some cases, but what happened to “buyer beware”? Doesn’t the consumer have a responsibility to be researching options and making smart decisions?

    — Laura    Sep 8, 09:01 AM    #

15. So – he claims that lenders have been unethical and providing misleading marketing. But has anything come out as illegal in the practices?

    What is he doing with the millions he has collected in fines, some from lenders that found it was less expensive to pay vs fight in court??

    Finally – how are our students being served through this and down the road? Now having multiple loans because of lenders no longer making loans or schools deciding to go 100% Direct Lending. What will this do to the default rates since there are so few consolidation loans left?

    THEN – with a school’s default rate going up, the school can look at funding issues….

    How many of our politians actually need financial aid to send their kids to college, but are telling the rest of the population how to do it????

    — PS    Sep 8, 09:06 AM    #

16. I don’t get it….So the company was asking for referals and rewarding them with a gift for the referal? What’s wrong with that? Being that with Federal Loans, no one else was going to give you a better rate. The rate was not negotiable. So what’s the problem? I need insight here….sounds like someone (Cuomo )wanted a Payola and is getting it.

    Now look whats happend. Thousands of people are now out of work. For what? Because someone gave a student an Ipod for a referal? sheeesh…what’s the world coming to….next you might here that you might not be able to get a private loan…wait I think it’s happening now. Check this link…
    http://online.wsj.com/article/SB122058856520403149.html?mod=googlenews_wsj

    The next generation student is in a world of hurt. Good Job Cuomo, Good Job Kennedy.
    For putting people out of work and taking care of us students….

    — J-Man    Sep 8, 02:58 PM    #

17. #16, read pp. 18-20: http://www.studentloanborrowerassistance.org/uploads/File/Report_PrivateLoans.pdf

    Here’s a suggestion to our legislators: Outlaw tuition discounting by schools since everyone and his brother offers scholarships. That way, schools must be price competitive and consumers can pick and choose based on price and quality just like they would with any other product, such as a home. The loan industry, as #16 suggests, could then be regulated based on standardized expectations. Right now there are too many people that believe that the school they have chosen will give them a scholarship or somehow discount the sticker price when they won’t. I believe that the bifurcation of price and financing would allow the market to operate efficiently and perhaps corect some of this buyer remorse.

    — JAS    Sep 8, 04:31 PM    #

18. It’s damn well about time. Now Cuomo should go after all the other loan companies. They are all getting rich off of struggeling college grads,just like the credit card companies.

    — Dan    Sep 8, 09:20 PM    #

19. Cuomo is the fraud. Everything about Student Loans is the same no matter who tghe lender is. The Government sets the terms, rates etc. Wake up fools he took away your incentives

    — G. St Ames    Sep 9, 10:16 AM    #

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