More College Aid Officials Identified in Widening Investigation

The aftermath of Higher Ed Watchs student loan company stock option investigation has not been pretty. Bit by bit, a very ugly side of the student loan industry's relationship with colleges and universities is coming to light.

Heightened scrutiny and new investigations are leading to new revelations that may just be the tip of an iceberg. Yesterday, investigators from New York Attorney General Andrew Cuomos office revealed that three more financial aid officials received payments from federal student loan provider, Student Loan Xpress. We genuinely are sad to relay reports that:

• Ellen Frishberg, a student loan officer at Johns Hopkins University, received more than $21,000 in graduate school tuition reimbursement and an additional $42,000 in consulting fees from Student Loan Xpress;
• Walter Cathie, the Dean of financial aid at Widener University in Pennsylvania, heads a consulting company paid $80,000 by Student Loan Xpress; and
• Timothy Lehmann, the director of financial aid at Capella University received more than $13,000 in consulting fees from Student Loan Xpress.

And yes, Student Loan Xpress is listed as a preferred lender at all three universities.

Johns Hopkins has already placed Frishberg on paid administrative leave. We wouldn't be surprised if additional institutions follow suit.

Around the country, fallout continues:

On Wall Street yesterday, CIT Group Inc. placed three top Student Loan Xpress executives on paid leave. CEO Mike Shaut, President Fabrizio "Breeze" Balestri, and Vice Chairman Robert deRose will remain on leave as CIT conducts its own independent review of Student Loan Xpress.

Were happy to hear that the CEO of CIT, Jeffrey Peek, is "taking allegations raised by New York Attorney General Cuomo very seriously." And if putting three executives on leave somehow facilities CITs internal probe, good work. More importantly, we hope that Peek sticks to his statement that CIT and Student Loan Xpress "will continue to cooperate fully with the attorney generals office in this matter," for full public disclosure is the first, crucial step towards reforming lender relationships.

On Capitol Hill, Senator Edward Kennedy (D-MA) and Representative George Miller (D-CA) are exercising oversight over the Department of Educations investigation of conflicts of interest in the Federal Student Aid office. (Disclosure: Higher Ed Watch staff used to work for Kennedy) Kennedys request includes:

• All documents, including but not limited to handwritten notes, emails, or any other communications and correspondence, referring to or containing communications between [Education Department official] Matteo Fontana and Student Loan Xpress.
• All documents, including financial disclosure forms, memoranda, or correspondence, referring toinformation about Mr. Fontanas personal financial interests, investments, or holdings during the time he was employed by the Department of Education.

On campuses, Student Loan Xpress has been removed from preferred lender lists. Both Columbia and USC removed Student Loan Xpress from their preferred lender lists after their financial aid administrators were identified as having a financial interest in the lender.

Local investigations of college officials are starting to spring up around the country. The Milwaukee Journal Sentinel, for example, examined Student Loan Xpress relationship with Jane Hojan-Clark, the director of financial aid at the University of Wisconsin-Milwaukee (UWM). And we know of similiar pending local media investigations not yet public. Further, we expect college students to start snooping around on their own as well.

Whether discovered conflicts of interests are real or perceived, Wall Street, Congress, colleges and universities, and the media are taking noteand hopefully pursuing their investigations with students best interests at heart.