Syracuse University will distribute almost $165,000 to students as a part of a settlement with New York state Attorney General Andrew Cuomo regarding the ethics of student loan practices, SU announced Monday.

From 2004 to 2006, SU received payments totaling about $164,085 from Citibank, one of the student loan providers on SU’s preferred lender list, a small list of loan companies the university recommends to students, said David Smith, SU’s vice president of enrollment management.

These funds, a part of Citibank’s referral fee program, were used to support operations within SU’s Office of Financial Aid and Scholarship Programs.

The $165,000 referral fee was .5 percent of Citibank’s total loan volume of $32.6 million at SU during the past three years, Smith said.

The funds will be divided among SU students who were issued loans from the Citibank provider in the past three completed academic years, Smith said.

‘This was a specification and a preference of the attorney general as part of our settlement,’ Smith said. ‘This is not the choice that we made. This is the choice that the attorney general made as a reasonable decision.’

It is still being determined how SU will distribute the funds, because some affected students may have already graduated, Smith said. Because SU did not receive any referral fee for the 2006-2007 academic year, students with current loans are not eligible for part of the funds.

As a part of the settlement, the university has also agreed to adopt guidelines created by Cuomo’s office to ensure ethical student loan practices are followed, Smith said.

‘The centerpiece of it all is the code of conduct,’ said Smith, of one of the reasons the university chose to be a part of the settlement. ‘This is an area where there has been very little guidance about what kinds of activities and regulations should or shouldn’t be in play.’

Citibank, the nation’s largest bank, with student loan business at about 3,000 schools, also agreed to pledge $2 million to a new national fund run by Cuomo’s office to educate consumers about the student loan process.

The settlements come as a result of the attorney general’s recent investigation into the relationship between student loan providers and universities. Cuomo was particularly interested with how universities determined which loan providers were placed on preferred lender lists.

To be in accordance with Cuomo’s guidelines, the university will also no longer allow lenders to subsidize any expenses for SU staff members who participate on advisory boards and/or in professional seminars, according to a SU press release.

Though SU took part in the settlement, the university maintains ethical procedures were always followed. Cuomo acknowledged this as a part of the settlement, Smith said.

‘We firmly believe that we have not participated in anything here that would be illegal, improper or anywhere injurious to our students and their families,’ Smith said. He also said Citibank has provided excellent service and rates at or below the other providers on the list to SU students.

SU deals with more than 150 student loan providers but offers a preferred lenders list to help those students who need guidance in choosing a reputable service, Smith said.

‘The whole point of the list is to be a reliable place where people can go to get advice about lender options,’ he said. ‘The key point is that people are not limited to that list.’

To be placed on the list, a lender must fill out an in-depth questionnaire, which is then judged by the Office of Financial Aid, Smith said. There are currently four banks on the list.

Cuomo’s investigation began in November 2006 when his office inquired about possible financial arrangements between universities and loan providers. He requested such information from six loan providers to begin with.

On Feb. 1 Cuomo announced he would send more than 60 letters to colleges and universities across the country requesting information on how loan providers were put on the preferred lender lists. He also sent two additional loan providers requests for information, one of which was Citibank.

On March 15 Cuomo announced he would send letters to more than 400 colleges and universities – including every institution in New York state and select others across the nation – warning them to fully disclose and terminate any potential conflicts of interests with student loan providers.

On Monday Cuomo announced the settlement with not only SU, but also New York University, St. John’s University, Fordham University, University of Pennsylvania and Long Island University. NYU and UPenn will make the largest payments at almost $1.4 million and $1.6 million, respectively.

Though they will make no reimbursements, all 29 State University of New York schools also agreed to the code of conduct.

In a statement, Cuomo applauded the progress made by the settlement.

‘We are beginning the process of restoring trust between universities and students, and now is the time for other schools and lenders to step up and end the conflicts, perks and revenue sharing that have been costing students in New York and across the country dearly,’ said Cuomo, in a press release. ‘These schools and Citibank are setting the example the entire industry should live by.’

A press release from the National Association of Student Financial Aid Administrators presented a differing opinion.

‘NASFAA agrees that any preferred lender list abuses and genuine conflicts of interest should end, however, such abuses are rare,’ the release stated. ‘NASFAA is confident that when the New York Attorney General’s office completes its investigation it will find only a very few problems; nearly every aid administrator and school is extremely ethical.’

Smith said SU took part in the settlement to make sure students know their best interests are being represented and said he hopes no students will be discouraged from working with the office.

‘We want to do absolutely nothing in the minds of our students or families that would undermine their confidence in the advice of us,’ he said.

Published on April 2, 2007 at 12:00 pm