Hopkins to pay N.Y. $1 million

University will settle N.Y. attorney general's student-loan complaint

June 15, 2007|By Gadi Dechter | Gadi Dechter,Sun reporter

The Johns Hopkins University has agreed to pay more than $1 million to settle a threatened lawsuit by New York Attorney General Andrew M. Cuomo, the latest in a string of victories for the crusading lawyer whose student-loan investigation has led to dismissals of top officials at Hopkins and other colleges nationally.

Hopkins has also agreed to five years of monitoring of its financial aid practices - the first such oversight arrangement Cuomo has struck with a school outside his state.

In announcing the agreement yesterday, Hopkins officials maintained that the school has not violated New York law but agreed to the settlement to "avoid lengthy, expensive litigation."

FOR THE RECORD - A headline in yesterday's editions inaccurately said that the Johns Hopkins University had agreed to pay $1 million to New York state to settle a lawsuit. Half of the $1.125 million settlement will go to New York, the other half to Maryland.
The Sun regrets the error.

Cuomo, however, characterized problems in Hopkins' financial aid office as "one of the worst situations that we've come across in our months of nationwide investigation. And we've settled with 25 colleges and with the major lenders across the country."

Hopkins and Cuomo's office have been in discussions since April, when Cuomo disclosed that Ellen Frishberg, then director of student financial services at Hopkins, received from 2002 to 2006 about $65,000 in consulting fees from a student loan company her office was promoting to parents and students.

Frishberg resigned in May after an internal investigation determined that her undisclosed consulting work violated Hopkins' conflict-of-interest policies.

In an interview yesterday, Cuomo said Frishberg remains under investigation by his office for possible criminal charges.

Frishberg declined to comment yesterday, but previously she maintained that Hopkins encouraged her to supplement her salary with consulting work and that she never did anything unethical.

Hopkins officials have said there is no evidence that students or parents were harmed by Frishberg's action or that any other university officials were involved.

"The university has reached this agreement so that we can focus on what is truly important: ensuring that our financial aid program operates in the best interest of students," President William R. Brody said in a statement.

The Hopkins settlement mirrors one Cuomo reached late last month with Columbia University. Like Frishberg, a top financial aid officer at the New York Ivy League school was found to have received personal financial benefit from a student loan company recommended to students.

Since March, Cuomo has revealed revenue-sharing schemes between schools and lenders - arrangements he called "kickbacks" - at several prominent universities across the country. In some cases, universities received money from lenders they recommended to their students. In other cases, financial aid officers such as Frishberg were receiving payments or other financial benefits.

So far, the New York attorney general has pressured more than two dozen schools and five major lenders to adopt a "code of conduct" governing relationships between colleges and loan companies. At least four financial aid directors have been dismissed as a result of Cuomo's probe, his spokesman said. Settlements like those with Hopkins have netted nearly $12 million for his "national education fund," to be used to educate college students about the financial aid process.

In the wake of Cuomo's investigations, nearly a dozen attorneys general and high-ranking members of Congress have been calling for sweeping reform of the $85 billion student-loan industry. Legislation pending in Washington would cement many of Cuomo's recommendations - such as mandatory disclosure of arrangements between schools and preferred lenders - in federal statute.

Maryland Attorney General Douglas F. Gansler joined the cavalry of reformers this week when he called on representatives of Maryland's public and private colleges to adopt, within two weeks, a student-loan code of conduct that is similar to Cuomo's.

Gansler's office will decide what to do with half of the $1.125 million that Hopkins will pay under the settlement. But he is not a party to the agreement, and yesterday he distanced himself from his New York colleague's aggressive posture.

"While I have a different style and perhaps prefer a more cooperative approach to the resolution of this issue," Gansler said, "I think Attorney General Cuomo's desire to do this is certainly a laudable thing to do."

Under the settlement, half of Hopkins' payment will go to Cuomo's education fund. Gansler said yesterday that he intends to spend the "vast majority" of the other half on financial aid to needy Maryland students attending Hopkins.

"I'm happy to hear that half of the money will go to the Gansler initiative," said Tina Bjarekull, president of an association representing 18 of Maryland's private colleges, including Hopkins.

Bjarekull said there is concern among the state's higher education leaders at the prospect of an outside attorney general "imposing" conditions and "suggesting they somehow have jurisdiction over conduct in another state."

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