Return to Sender

A number of students who borrowed money from private lenders recommended by St. John’s will see some of that money returned to them before the start of next semester.

Under an agreement with New York State Attorney General Andrew Cuomo, St. John’s is required to pay $80,553 in reimbursements to student borrowers (for one year), the amount received by the University over three academic years. According to the University, the revenue was used to pay “administrative costs” in the financial aid office.

Eligible St. John’s students will receive their reimbursement within 120 days with the amount depending on how much they borrowed and at what rate. Students can contact the financial aid office for further assistance.

Combined, St. John’s, NYU, Fordham, LIU, Syracuse and UPenn will reimburse $3.2 million to affected students.

The news comes in the wake of a recent investigation launched by Cuomo examining student lending. The probe uncovered that many private lenders have made arrangements with colleges across the country to gain a spot on their preferred lenders list in exchange for perks and profit. In some cases, student lenders have even given trips and other gifts to college financial aid officers.

In total, the investigation has spread to more than 100 universities and more than six lenders.

According to a statement released by Dominic Scianna, director of Media Relations for St. John’s, “The University has given its full cooperation to the Attorney General’s Office since the beginning of the investigation.”

A similar statement was also issued in a letter by University President the Rev. Donald J. Harrington, C.M.

One company at the center of the controversy is Education Finance Partners (EFP). EFP is one of three preferred lenders by St. John’s. The other two companies cited by the attorney general’s office have not provided the school with any funds.

St. John’s is one of more than 60 schools linked to EFP including Long Island University, Fordham University, Drexel University, Boston University, Clemson University, Duquesne University, Pepperdine University, Texas Christian University, Washington University in St. Louis, and the University of Mississippi.

According to the attorney general, EFP has “aggressively offered schools cash kickbacks in exchange for business.” Cuomo currently has a lawsuit pending against the California-based group.

“EFP has been recognized in the industry for its zero fee, low interest rate loans,” Scianna said. “Each [of St. John’s preferred lenders were] selected for having among the lowest rates in the country, no fees and historically the best service to students.”

He added, though, that “under the terms of the agreement with the attorney general, St. John’s will not participate in a revenue sharing agreement with EFP going forward.”

EFP issued a statement saying that they will be improving their revenue reinvestment program to provide more clarity to student and parent borrowers.

“To avoid any further misunderstanding of our program, we will immediately enhance our disclosure protocol to provide even greater transparency,” said Tamera Briones, founder and chief executive of EFP. “While nearly all of the universities use the proceeds to help students today, we will now explicitly require that all schools use these proceeds for the benefit of students.

As an industry leader, we are committed to being at the forefront of best practices in our industry and will continue to conduct ourselves with the highest business and ethical standards.”

A new Code of Conduct, which prohibits colleges and their employees from receiving anything of value from lending corporations, stemmed from the agreement with the attorney general’s office. Following this code, schools must clearly state the process used to determine each company’s placement on preferred lender lists and students have the right to choose a company not on the list. Also, employees of lenders are not allowed to work or provide assistance to a college financial aid office.

“The College Code of Conduct spells out in black and white that no lender may pay a school for placement on a preferred lender list and no school may hide the reason it chose to recommend a particular lender,” Cuomo said.

Citibank, the nation’s largest bank and another lender involved in the scandal, agreed to give $2 million to a new national fund dedicated to educating college-bound students and their parents about student loans.