Spring Break
Washington takes note of loan scandal
By: Noah Cohen
Issue date: 4/13/07 Section: News
Originally published: 4/13/07 at 5:00 AM EST
Last update: 4/13/07 at 5:04 AM EST
Originally published: 4/13/07 at 5:00 AM EST
Last update: 4/13/07 at 5:04 AM EST
The New York Attorney General's probe into the relationship between schools and the student loan industry has reached the nation's capital, with Senator Edward Kennedy calling for an investigation, a presidential candidate weighing in and the suspension of a federal education official.
Sen. Kennedy has asked the Securities and Exchange Commission to look into the sale of stock by lender Student Loan Xpress to college financial aid offices.
Fabrizio Balestri, president of Student Loan Xpress, privately acquired shares of the company and sold them to financial aid officers at the University of Texas, the University of Southern California and Columbia University according to a statement released by Kennedy's office.
"It appears that Mr. Balestri acquired the shares in the private placement at a significant discount to their market value and sold them to the purchasers described above at the same discounted value," Sen. Kennedy wrote in a letter to SEC Chairman Christopher Cox.
According to Sen. Kennedy, Mr. Balestri attempted to hide the discounted sale by sending a "Memorandum of Gift" to the financial aid officers describing the stocks as free.
By 2006, Student Loan Xpress had gained about 12 percent of its volume from loans through the relationship with Columbia University according to a statement from Kennedy's office.
In another development, Sallie Mae, another private loan company, agreed to adopt the Attorney General's recommended code of conduct.
The code of conduct specifically prohibits schools from engaging in revenue-sharing agreements with lenders.
Sallie Mae has also agreed to stop running financial aid call centers at schools, prevent school administrators from serving on advisor boards and no longer provide trips for school employers according to an Associated Press report.
Democratic Presidential Candidate John Edwards has added his voice to growing criticism of the student loan industry.
Sen. Kennedy has asked the Securities and Exchange Commission to look into the sale of stock by lender Student Loan Xpress to college financial aid offices.
Fabrizio Balestri, president of Student Loan Xpress, privately acquired shares of the company and sold them to financial aid officers at the University of Texas, the University of Southern California and Columbia University according to a statement released by Kennedy's office.
"It appears that Mr. Balestri acquired the shares in the private placement at a significant discount to their market value and sold them to the purchasers described above at the same discounted value," Sen. Kennedy wrote in a letter to SEC Chairman Christopher Cox.
According to Sen. Kennedy, Mr. Balestri attempted to hide the discounted sale by sending a "Memorandum of Gift" to the financial aid officers describing the stocks as free.
By 2006, Student Loan Xpress had gained about 12 percent of its volume from loans through the relationship with Columbia University according to a statement from Kennedy's office.
In another development, Sallie Mae, another private loan company, agreed to adopt the Attorney General's recommended code of conduct.
The code of conduct specifically prohibits schools from engaging in revenue-sharing agreements with lenders.
Sallie Mae has also agreed to stop running financial aid call centers at schools, prevent school administrators from serving on advisor boards and no longer provide trips for school employers according to an Associated Press report.
Democratic Presidential Candidate John Edwards has added his voice to growing criticism of the student loan industry.
