Columbia aid officer faces scandal

Most loan-burdened college students expect help from their financial aid officers. Few expect those officers to line their pockets with profits from the loan companies they recommend to students.

But that is exactly what happened at Columbia University, where Executive Director of Financial Aid David Charlow allegedly collected more than $100,000 from the sale of stock of Student Loan Xpress, which his office had endorsed as a preferred lender. Financial aid officers at the University of Texas, Austin, and the University of Southern California have also been implicated in the scandal. Charlow is currently on paid leave pending an investigation, Columbia announced last week.

The Columbia scandal was uncovered during the New York attorney general’s investigation into the practices of student loan companies and their relationships with educational institutions. Critics have charged that the ownership of a loan company’s stock by a school official whose job it is to recommend lenders could constitute a conflict of interest. But it is not clear whether the university officials did anything illegal.

In an attempt to prevent such conflicts of interest, Yale faculty, administrators and some staff are required to submit a form detailing their holdings in and dealings with other companies. If their jobs entail dealings with companies they are invested in or affiliated with, the employees are required to recuse themselves from Yale-related decisions regarding those companies.

Yale President Richard Levin said the University takes its conflict of interest policies very seriously.

“Obviously it’s not appropriate for financial aid officers to be benefiting from the particular direction that they steer students to take loans,” Levin said. “We have conflict of interest guidelines and we expect that those are adhered to.”

Dean of Admissions Jeff Brenzel said Yale’s conflict of interest guidelines are extremely rigorous in their discouragement of underhanded dealings. As a result, he has disengaged from corporate and nonprofit boards on which he previously served and has declined other offers.

“The University does a pretty assiduous job of monitoring every year and getting people to self-report in a bunch of different categories,” Brenzel said. “[Administrators serving on boards] is not an infrequent situation because organizations and companies need boards to operate, but Yale’s guidelines are pretty tight.”

One Columbia sophomore who has taken out loans to fund her education said the Columbia financial aid office has violated her trust in regard to the scandal. The student requested anonymity to keep her financial matters private.

“They are not all that generous with their financial aid to begin with, so the fact that this scandal comes up with the loans is an outrage,” she said. “We expect better, obviously.”

Yale Student Financial Services identifies the Connecticut Student Loan Foundation in partnership with Sallie Mae as the preferred lender for students on financial aid, although students may choose from several lending companies. Sallie Mae is the nation’s leading student loan provider and college savings plan administrator.

Connecticut Student Loan Foundation President Mark Valenti said that as a 501(c)(3) nonprofit company, the potential for conflict of interest due to stock holdings does not exist, since no one can buy stock in the company. He said the company has no monetary deals with schools in return for being placed on their preferred loan lists, and the only mutual benefit is that both the school and CSLF may publicize the preferred status.

Valenti said he believes the Columbia incident is isolated and atypical of industry-wide practices.

“I was more than extremely surprised about it, and I’m not sure that we’ve heard the entire story yet, but if what I read is the bottom line, the fact is it’s extremely unfortunate and I’m sure that this stuff is happening in a very small segment of the institutions,” he said. “The problem is when you hear about it at one or two places, the whole industry gets a black eye out of it as a result.”

In 2005-’06, 63 percent of Yale undergraduates received financial assistance from Yale or outside sources in the form of scholarships, grants, educational loans or work-study programs.

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