How the N.Y. Attorney General Will Use $13-Million From Loan Scandal

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How the N.Y. Attorney General Will Use $13-Million From Loan Scandal

New York’s attorney general, Andrew M. Cuomo, plans to use the $13-million his office has collected from colleges and student-loan companies to create a Web-based student-loan center for borrowers and to run a nationwide public-service announcement about how to pay for college and minimize student-loan debt.

In 2007 and 2008, 14 lending companies and three colleges agreed to pay into a national education fund set up by Mr. Cuomo to settle claims arising from his investigations into conflicts of interest in student lending and deceptive marketing.

The attorney general announced last month that he was seeking applications from New York-based nonprofit groups and government entities through July 6 for grants to develop and put in place the loan center and the public-service campaign. Colleges are ineligible for the money.

Benjamin Lawsky, a special assistant to the attorney general, said that colleges had been excluded from the grants “in order to avoid conflicts of interest or the appearance of conflicts of interest” in the wake of an investigation that examined improper practices at institutions of higher education. He said the objectivity of the information provided through the loan center or the public-service announcement could be compromised if any particular college were involved.

The attorney general had said when he collected the money that it would be used to educate high-school students and their families about the financial-aid process, but it wasn’t until May 20, when the attorney general’s office published a notice in the New York State Register, that Mr. Cuomo outlined how the funds would be used.

The notice said the Web-based student-loan center would provide free information to students, college graduates, and parents across the United States about how to minimize student-loan debt and how to choose the best loan options. It would also help distressed borrowers. The center would allow students and parents to “interact in real time,” the notice said, with people who are trained to answer questions about paying for college and repaying student loans.

The national public-service announcement would also provide information about how to minimize student-loan debt and how to choose the best student-loan options. The campaign would “use as spokespersons public figures, such as actors or musicians, who are popular among high-school and college students,” the notice said.

The projected start date for the grant contracts is January 1, 2010. —Sara Hebel

Posted on Monday June 22, 2009 | Permalink |