By Amit R. Paley
Washington Post Staff Writer
Tuesday, April 10, 2007
The directors of financial aid at Johns Hopkins University and two other universities received tens of thousands of dollars from a student loan company as the officials and their schools urged students to borrow money from that lender, New York state investigators said yesterday.
The payments by the company, Student Loan Xpress, are the latest revelations from a widening investigation into the $85 billion-a-year student loan industry. Congressional Democrats and state law enforcement officials are probing what had been little-known financial relationships among lending companies, universities and government officials.
Investigators for New York Attorney General Andrew M. Cuomo said yesterday that administrators at Johns Hopkins in Baltimore and the other schools -- Widener University in Chester, Pa., and Capella University, an online school based in Minneapolis -- profited from lucrative consulting and business agreements with Student Loan Xpress while they steered student borrowers to the company. Details of the inquiry were disclosed through letters investigators sent to the three universities, but none of the financial aid officials has been charged with a crime.
Ellen Fishberg, the Johns Hopkins director of student financial services, received more than $65,000 from the lender since 2002, the university said it learned yesterday. The company paid about $22,000 of Fishberg's graduate school tuition at the University of Pennsylvania between 2002 and 2004, according to investigators and Johns Hopkins officials. They said she was paid an additional $43,000 in consulting fees and $1,200 in travel expenses while she sat on the company's advisory board.
A Johns Hopkins spokesman said Fishberg was placed on paid leave pending an internal investigation. Fishberg did not respond to telephone and e-mail messages seeking comment.
Student Loan Xpress became a so-called "preferred lender" at Johns Hopkins one year after the payments to Fishberg began, investigators said. In each of the past four years, more than 40 percent of Johns Hopkins students took out loans through the company. In a letter to the university, Cuomo's office indicated that Fishberg may have received the money for helping "steer loan business" to the company, known as SLX.
"Students may therefore have been left with the false impression that SLX was preferred because it was best for students and their parents when in reality the company was selected because of its payments to Ms. Fishberg," wrote Benjamin M. Lawsky, a deputy counselor and special assistant to Cuomo.
In a statement, Johns Hopkins said: "The university is committed to operating its financial aid program in compliance with the highest ethical standards and will, of course, cooperate with the attorney general's request" for information.
The New York investigators also said that a company run by the dean of financial aid at Widener received $80,000 from Student Loan Xpress and that Capella's financial aid director was paid more than $12,000 to develop a business plan for the lender. Widener and Capella said they were reviewing the matter and declined to make the two officials available for comment.
Last week, financial aid directors at Columbia University, the University of Texas and the University of Southern California were suspended after it was revealed that they invested in Student Loan Xpress while recommending the company to student borrowers. On Friday, a senior official at the U.S. Education Department was placed on leave after the agency learned that he held $100,000 worth of stock in the lender while he helped oversee the student loan industry.
Yesterday, the lender's parent company, CIT Group Inc., based in New Jersey, announced it has suspended three senior executives at Student Loan Xpress because of Cuomo's investigation into the company: Fabrizio Balestri, its president; Mike Shaut, the chief executive officer; and Robert deRose, the lender's vice chairman.
"We take the allegations raised by New York Attorney General Cuomo very seriously," Jeffrey M. Peek, chief executive of CIT, said in a statement. "The management changes announced today should facilitate CIT's independent review of Student Loan Xpress' student lending practices and its assessment of existing policies and procedures governing student lending."
Also yesterday, investigators for Sen. Edward M. Kennedy (D-Mass.), chairman of the Senate Education Committee, said they have discovered that the financial aid officials from Columbia, the University of Texas and USC and the Education Department official acquired their stock in a questionable and secretive deal arranged by Balestri and deRose. Kennedy said the Securities and Exchange Commission should examine the matter.