Aid official at Hopkins is suspended

Payments to financial services chief from loan company probed

April 10, 2007|By Gadi Dechter | Gadi Dechter,Sun reporter

A top financial aid administrator at the Johns Hopkins University was put on paid leave yesterday while the university investigates her ties to a student loan company that is at the center of a national probe by New York's attorney general, Hopkins officials said.

University officials were informed yesterday by the lender's parent company that Ellen Frishberg, director of student financial services, received about $65,000 in consulting fees since 2002 from Student Loan Xpress. The loan company is one of several "preferred lenders" Hopkins recommends to families for financing their children's education.

Hopkins also disclosed yesterday that Frishberg has been a member of the student-loan company's advisory board. University spokesman Dennis O'Shea declined to say whether Hopkins officials were aware of that before yesterday.

The office of New York Attorney General Andrew M. Cuomo wrote Hopkins' president, Dr. William R. Brody, yesterday asking for the university's cooperation in Cuomo's investigation of Student Loan Xpress and its relationships with financial aid offices at several universities nationwide.

"Students may ... have been left with the false impression that [Student Loan Xpress] was preferred because it was best for students and their parents when in reality the company was selected because of its payments to Ms. Frishberg," Benjamin Lawsky, a special assistant to Cuomo, said in the letter to Brody.

Frishberg did not return calls yesterday to her home and cell phone. She has been placed on paid administrative leave "pending an inquiry by the university into the circumstances of the payments," said O'Shea in a statement.

Frishberg is the fourth in a string of top university officials in recent days to be implicated in a sweeping student-loan investigation by Cuomo.

Probe widens

Last week, financial aid directors at Columbia University, the University of Southern California and the University of Texas were reportedly all put on leave after their personal investments in Student Loan Xpress' former parent company were disclosed by the New America Foundation, a Washington think tank.

Cuomo is investigating the $85 billion student loan industry for potentially illegal conflicts of interest, particularly as they relate to "preferred lender" lists commonly compiled by universities. The New York attorney general is looking into whether undisclosed financial arrangements between schools and lenders undermine the best interests of students and their families.

In the letter to Brody, Cuomo's office asked Hopkins to determine "whether Ms. Frishberg or any other financial aid officers received any payments, stock, or other benefits from any other lending institutions." The letter also asked Hopkins to provide documentation of how it has selected its preferred lenders in the past six years.

`Preferred' lenders

When universities endorse certain lenders as "preferred," the overwhelming majority of students and families choose to borrow from them, according to Mark Kantrowitz, publisher of FinAid.org, a student aid Web site.

Though Hopkins students can borrow about $19,000 over four years directly from the government, Student Loan Xpress is the largest provider of loans to Hopkins parents and graduate students, according to O'Shea.

Some lenders also make payments to universities based on the volume of loans taken by their students, Cuomo has found.

Kalman Chany, author of the book Paying for College Without Going Broke, said Cuomo's inquiry is revealing a "disturbing trend."

"It seems to me that this investigation is not showing just some isolated, rare instance," Chany said. "Parents really can't assume anymore that the aid officer is going to give you unbiased information."

In an interview with Sun columnist Eileen Ambrose last month, Frishberg said that Hopkins has declined financial incentives dangled by lenders who want to be on the college's preferred lender list. "We have ethics here," Frishberg said.

Frishberg has been employed at Hopkins since 1989, and is well-regarded in financial aid circles, said Kantrowitz. "She is one of the most dedicated financial aid administrators I know," he said. "This is a surprise to me."

Shakeup

Also yesterday, the top three executives of Student Loan Xpress were put on paid leave, according to the parent company, CIT Group Inc.

According to press accounts Cuomo's office has been investigating stock transactions involving a senior U.S. Department of Education official. Matteo Fontana, who oversaw student loan providers for the federal agency, was put on leave after reports surfaced that he owned in 2003 about $100,000 in stock in Student Loan Xpress' former parent, Education Lending Group.

"As a company that holds itself to the highest standards of business ethics and integrity, we take the allegations raised by New York Attorney General Cuomo very seriously," CIT, which bought Education Lending Group in 2005, said in a statement yesterday.

"We will continue to cooperate fully with the Attorney General's office in this matter as we continue our internal review."

A CIT spokesman declined to comment yesterday on his company's relationship with Frishberg.

Frishberg's financial relationship with the loan company is "questionable," said a Cuomo spokesman.

"Our investigation is very broad and encompasses a lot of different schools and different lenders, and as we move forward we'll make the best decision about how to proceed, said Arthur Harris, the spokesman.

gadi.dechter@baltsun.com

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