Colorado’s two largest universities have been dragged into a national student-loan probe launched by the New York Attorney General’s Office.
Both the University of Colorado at Boulder and Colorado State University alumni associations received tens of thousands of dollars from a Nebraska- based student-loan company over the past several years.
In exchange, the associations provided former student address lists to Nelnet Inc. and agreed to endorse the company.
The arrangements violate several New York state laws ranging from false advertising to deceptive marketing practices and could violate Colorado laws as well, officials from both states said Wednesday.
Both universities cooperated with the national investigation, and officials from both institutions maintained Wednesday that they were simply trying to help their alumni. They said they didn’t knowingly enter into any illegal contracts.
“We have nothing to hide,” said CSU spokesman Brad Bohlander. “No one has made any allegations that we’ve been involved in any illegal activity. … Everything is on the up and up and we’ll continue to fully participate in any sort of investigation.”
New York was able to use its own state laws to monitor contracts in Colorado because it has students enrolled at both Colorado universities.
“All of these schools market to students in New York,” said Jeffrey Lerner, spokesman at the New York Attorney General’s Office. “This is a national investigation with a national scope.”
An agreement between the New York Attorney General’s Office and Nelnet was reached earlier this week, with Nelnet agreeing to give $2 million to a fund educating college-bound students about loan options.
Nelnet ended its contracts with CSU and CU earlier this summer.
“Our perspective was, we were providing information to our alumni,” said Gigi Reynolds, spokeswoman for the CU Foundation, the university’s private fundraising arm. “We weren’t hard-selling them to use Nelnet as a provider. We were making that information available to them and using the (Nelnet) income to help fund the cost of running programs.”
This week’s agreement with Nelnet is a part of a sweeping investigation by New York Attorney General Andrew Cuomo into the student-loan industry.
Also on Wednesday, Cuomo’s office issued another round of subpoenas – including one to CSU’s athletic department – probing the relationships athletic departments have with another student-loan provider, University Financial Services.
CSU officials said they will cooperate fully with this investigation as well.
Nelnet’s reach was broad
The New York attorney general’s work has already resulted in agreements with 11 companies.
The investigation also sparked a federal law change, passed in both the U.S. Senate and the House this spring, that bans revenue-sharing agreements between schools and loan companies and prohibits companies from giving gifts to school officials.
New York officials say Nelnet had contracts with alumni associations at more than 100 colleges or universities across the country.
The CU Foundation, which oversees the Boulder alumni association, was in its fourth year of a five-year contract with Nelnet. Each year, the foundation received a $25,000 check from the student-loan company. It also received $100 for each loan over 250 student consolidation loans that Nelnet inked with CU-Boulder alumni.
Over four years, the CU Foundation received roughly $136,000 from Nelnet.
Reynolds said the investigation has sparked an evaluation of practices and contracts at the CU-Boulder alumni association.
“Trust and integrity is essential to building long-term relationships with our alumni,” she said.
Reynolds wasn’t sure whether the Nelnet contract was exclusive, but she said the association didn’t have any other contracts with student-loan consolidation companies.
Practice “morally wrong”
The CSU Alumni Association received at least $79,200 from Nelnet since 2005. In August 2005 and June 2006, it received checks for $25,000 each.
In June 2006, it also received a $29,200 commission check from Nelnet. According to the contract, the association was supposed to get $50 for every student-loan application Nelnet received from a former CSU student, which would mean there were close to 600 applicants.
Bohlander said the association hasn’t heard from the New York Attorney General’s Office that it did anything wrong.
“They have never contacted us via e-mail or via phone or via letter with any allegation that our contract with Nelnet broke any laws,” he said.
Lerner, at the New York Attorney General’s Office, said that what took place at CU and CSU, as well as the other schools, was “morally wrong.”
Students believed their alumni associations would look out for them, he said.
“We’ve discovered again and again that these institutions were not looking out for the best interest of students,” he said.
New York’s consumer-protection laws are particularly broad and strong, Lerner said.
In Colorado, Attorney General John Suthers has been kept abreast of the investigation but has not been involved – at least not yet, said spokesman Nate Strauch.
“Any sort of kickback or transfer of funds in exchange for a favor could be considered illegal in Colorado,” he said. “We’re oftentimes dealing in shades of gray in these issues.”
Staff writer Allison Sherry can be reached at 303-954-1377 or asherry@denverpost.com.
