Published: April 23, 2007 01:28 pm      

MONDAY: States join in student loan agreements (1:30 p.m.)

ALBANY, N.Y. (AP) - Two colleges agreed Monday to change the way they recommend lenders to students and one of them will reimburse students $88,000, the latest institutions to settle New York Attorney General Andrew Cuomo's probe into loan arrangements that he says favored banks and schools, not students.

Also Monday, a lender agreed to pay $21,000 to a government fund to help parents and students learn about their rights in borrowing student loans, Cuomo announced in a joint conference call with the attorneys general in Illinois and Missouri.

Washington University in St. Louis, DeVry University in Oakbrook Terrace, Ill., and Career Education Corp. of Hoffman Estates, Ill., agreed to a code of conduct to protect students from kickbacks by lenders to colleges in exchange for steering students to the companies.

Washington University ended a one-year revenue sharing agreement with Education Finance Partners of California in 2006 that would have provided revenue to the university if it had increased the number of customers for the lender, said Missouri Attorney General Jay Nix.

The University denies it violated any state law and said it never received payments under the one-year agreement with the lender.

DeVry ended a similar agreement in 2005 after one year and as a result will pay $88,000 to students who borrowed money during that time from Career Education Corp. Career Education Corp. of Hoffman Estates, Ill., will pay $21,000 to a government fund to help parents and students learn about their rights in borrowing student loans.

DeVry has 80 campuses in the United States and Canada.

The state attorneys, including Illinois Attorney General Lisa Madigan, said they were unsure how many students will be reimbursed. But Cuomo noted a previous settlement under similar circumstances resulted in $500 awards. That would mean 176 would receive reimbursements.

Cuomo wouldn't provide a figure for how much more students have paid in interest or other costs because of the arrangements. He said it varied case to case.

Spokesmen for the colleges had no immediate comment.

The key to Monday's agreements, however, is the code of conduct. Schools that sign are obligated to end any revenue sharing agreements with lenders and provide full disclosure to families and students about any ties with any lenders.

"I think the tide is turning now," Cuomo said. "If a school says it hasn't signed on to the code of conduct, I think that then a prudent student starts to ask questions."

Last week, Cuomo enlisted the nationwide support of his colleagues in investigating what he considers kickbacks in the student loan industry.

The law enforcement officials developed strategies for investigating the agreements in which lenders have provided cash, gifts, trips, tuition payments, stock options and more to become a "preferred lender" at a college even if the lender doesn't have the best rate or terms for students.

Cuomo is also scheduled to testify about the case before a congressional committee next week.

It was the latest action in a nationwide investigation of the $85 billion student loan industry pressed by Cuomo after it began with inquiries under former Attorney General Eliot Spitzer. Several lenders and colleges and universities have already settled lawsuits and adopted Cuomo's reforms.