Drexel sued for deceptive business practices
April 27, 2007
__University is one of many targeted for misusing student loan companies__
New York’s Attorney General Andrew M. Cuomo has just informed Drexel University in Philadelphia that they will be sued for deceptive business practices, accusing the school of making a private lending firm base in San Francisco, Education Finance Partners, their “sole preferred private loan provider,” according to a New York Times article.
p. Cuomo’s lawsuit accuses Drexel of guiding loan-seeking students to Education Finance as part of an agreement between the firm and the university, stating that payments to the university for their endorsement will be based on loan volume.
p. This contract, last signed in 2006, states that Education Finance must pay the university three-quarters of 1 percent of the sum of all loans taken by Drexel students.
p. Drexel has received over $120,000 from Education Finance since 2005, and the firm owes them an additional $126,000 in accordance with their deal. Since 2005, the lending firm has funded over $16 million in loans from Drexel students alone.
Cuomo claims that he has jurisdiction to sue Drexel because “the university recruits students from New York and New York families rely on Drexel’s representation about preferred lenders.”
p. This lawsuit is Cuomo’s first attempt in the state’s burgeoning investigation of the corruption in the college loan industry. Drexel’s administration refused to accept the settlement, giving Cuomo the opportunity to make the university a showcase of what will happen to universities that do not comply.
p. “I call this opening another front,” Cuomo said. “Drexel participated in revenue-sharing, which I consider to be the most egregious activity that we’ve found at any institution, and they did it to one of the greatest extents in the country, meaning they received more money back. Also, they refused to settle.”
p. Settlements have been reached with 12 other schools with similar accusations that have consented to follow a code of conduct with lending firms, and most schools have also agreed to reimburse studens.
p. Drexel Vice President for University Relations Philip Terranova maintains that the university has done nothing wrong by engaging in such a deal with Education Finance Partners.
p. “Drexel will vigorously defend its position in this matter,” Terranova said. “We believe the allegations are without foundation in law or in fact. We have carefully reviewed our practices regarding student loans, and we are satisfied that there is no conflict of interest.”