By Amit R. Paley and Jeffrey H. Birnbaum
Washington Post Staff Writers
Tuesday, May 22, 2007
The financial aid directors at Johns Hopkins and Columbia universities have been forced out of their posts amid revelations that they received payments or gifts from loan companies they recommended to students, the schools said yesterday.
Their departures mark the latest fallout from the New York attorney general's investigation into conflicts of interest in the $85 billion-a-year student loan industry.
The John Hopkins director, Ellen Frishberg, resigned Friday after the university determined that she violated the school's ethics and conflict of interest policies by taking $65,000 from the lender Student Loan Xpress, the university said.
Columbia fired financial aid director David Charlow yesterday in response to the revelation that he held more than $100,000 worth of stock in the same lender.
"While our investigation has uncovered many dirty secrets of the college loan industry, the stock and money that Student Loan Xpress funneled to Charlow and Frishberg were among the most flagrant," New York Attorney General Andrew M. Cuomo (D) said.
Aides to Cuomo pointed to "talking points" that Charlow and Frishberg drafted last year for use by Student Loan Xpress employees to rebut arguments made by a competitor. In addition, Charlow asked Student Loan Xpress to create a list of lenders that would prove the company offered students the most savings.
The list should "lead students to [the] best decision in an idiot proof way," Charlow wrote in an e-mail exchange disclosed by Cuomo's office.
"[S]ome times you have to at least lead these students to the well," responded company executive Fabrizio Balestri.
Johns Hopkins spokesman Dennis O'Shea said Frishberg received more than $2,000 from American Express, which the school recommended to students. He said she also had consulting relationships with other lenders but declined to elaborate. Investigators for Sen. Edward M. Kennedy (D-Mass.), education committee chairman, also are reviewing records related to Frishberg.
Charlow could not be reached for comment. Frishberg's attorney, David Kasakove, said: "She never intended to do anything that would be perceived as harmful to either Johns Hopkins University, its students or their parents and has always acted in good faith."
Also yesterday, lending giant Sallie Mae announced changes to the way it will operate after it goes private later this year and pledged to appoint a new board of directors and keep the company's actions open to the public.