3 Conn. schools settle loan allegations

3 Conn. schools settle loan allegations

	Published : Mon, 27 Aug 2007 21:03 By : Agencies Print this Story

HARTFORD, Conn. (AP) - Three Connecticut schools have agreed to donate tens of thousands of dollars to scholarship funds to settle allegations that they received benefits in exchange for giving preferred lender status to a student loan company.

In an agreement announced Monday by state Attorney General Richard Blumenthal, Fairfield University, Sacred Heart University and Trinity College denied allegations that they violated laws governing financial aid.

Blumenthal also announced that the Connecticut Conference of Independent Colleges, a group of 17 schools in Connecticut, agreed to a financial aid code of conduct that prohibits schools and financial aid staff from accepting compensation from lending institutions.

Connecticut is the latest state to take such action after investigations of the student loan industry found arrangements benefiting schools and lenders at the expense of students.

'This code of conduct assures that students have access to the best available deal, unclouded and uncompromised by other interests,' Blumenthal said.

New York Attorney General Andrew Cuomo, who has been investigating the student loan industry, said Monday that 12 student loan companies, including the eight largest lenders in America, have agreed to a code of conduct.

Admissions and financial-aid software discounts of $16,000 to Fairfield, $15,000 to Sacred Heart and $12,000 to Trinity were provided in 2003 and 2005 in exchange for the schools listing the College Board Inc. education loan program as a preferred lender, Blumenthal said.

Each of the schools included the College Board on its list of preferred lenders without disclosing to students or their parents that it received the discounts, the attorney general said.

In addition, AMS, a lending affiliate of Sallie Mae, paid for Fairfield's director of financial aid to attend a meeting in Florida, the attorney general said. AMS was a preferred lender at the university.

Edna Johnson, a spokeswoman for the New York-based College Board, said no individual or college profited from student loans generated by the preferred lender agreement.

The College Board ended the practice 18 months ago, she said, because preferred lenders should be selected 'solely on the basis and conditions of the loans, customer service and the other factors that make the lenders' products good options for borrowers.'

'We regret this deviation from our standard practice led us to be part of the investigation,' she said.

The new code of conduct prohibits compensation in the form of money, lodging, meals, travel or any other service or product valued at more than $50.