3 Utah schools listed in lender probe

Three Utah schools showed up on a list of colleges and universities nationwide that are involved with lenders with questionable practices, even violations of law, regarding student loans.

The report on marketing practices, released Thursday by Sen. Edward M. Kennedy, D-Mass., is the first congressional report in an ongoing series that seeks to expose illegal or improper payments made by various lenders to schools with the expectation of placement on a so-called preferred lenders list.

Kennedy, chairman of the U.S. Senate Health, Education, Labor and Pensions Committee, said that the results, although incomplete, "underscore the urgent need for systemic reform in the student loan system."

Several payments made by U.S. Bank were listed in the report, ranging from $500 to $15,000 to various schools across the country. They included sponsorship and support given to events organized by Utah State University, Southern Utah University and Utah Valley State College. Amounts given to the Utah schools did not exceed $1,500 and funded such activities as outreach programs and other fund-raising efforts, as well as scholarships and financial aid advertisements.

Officials from the schools could not be reached Friday afternoon for comment.

Other lenders that compiled lists used in the report include Citibank, Citizens Bank, Collegiate Funding Services JPMorgan Chase and other specialized student lenders.

The payments are said to be in violation of the Higher Education Act, which prohibits lenders from offering compensation to schools in exchange for preferential treatment concerning the Federal Family Education Loan Program. Information obtained from at least 10 banking institutions indicates that the lenders had both offered and provided in-kind compensation to schools knowing they'd be compensated in return.

The report, titled "Report on Marketing Practices in the Federal Family Education Loan Program," is backed by 350 pages of e-mails and other disclosures of inappropriate activities.

A summary of the findings by Kennedy's staff states that "solicitation of any benefit not explicitly permitted by existing law creates an appearance of conflict of interest, undermines students' trust in the process, and magnifies the risk of illegal quid pro quo deals." The report concluded that the problem is seen as far-reaching and "cannot be isolated to a few 'problem' lenders or schools."