The New York Attorney General found potentially unethical financial ties between USC's top financial aid officer and one of the university's preferred lending companies for admitted students, a USC official said Wednesday.
New York Attorney General Andrew Cuomo sent a letter yesterday to USC warning the school that Catherine Thomas, the associate dean of financial aid, owned 1,500 shares of Education Lending Group Inc.
USC lists one of the group's subsidiaries, Student Loan Xpress, as a preferred lender, the Associated Press reported.
The New York Times reported Thomas sold the stock in 2003 and held additional options in the company.
The attorney general also sent letters to the University of Texas and subpoenaed to Columbia University, according to the AP. The letters and subpoena are part of a broader investigation into the $85-billion college loan industry, a news release stated.
"We have received the attorney general's letter," said James Grant, the executive director of media relations at USC. "We are reviewing the letter and the information in it, and we will respond."
Cuomo said he is interested in the criteria colleges and universities use to determine their preferred lender lists. Cuomo found schools often purposely keep that criteria secret or unclear, the release said.
Grant would not say whether USC was previously aware of Thomas' ties with the lending company.
Cuomo can investigate USC because it recruits students from New York, according to the AP.
University officials at Columbia have suspended David Charlow, the associate dean of student affairs who owned 7,500 shares of Education Lending Group, according to the AP. Charlow sold the shares in 2005 for a total profit of more than $100,000, the AP reported.
Cuomo's office discovered a number of questionable practices during his investigation. Some colleges engage in agreements with lending companies to offer loans only through that company; lenders often give kickbacks in return.
Some lenders also gave paid vacations and offered payments to schools to drop out of the direct federal loan program so they could increase their business.
