Government Relations Client Bulletin
May 2007
Bricker & Eckler LLP
100 South Third Street Columbus, Ohio 43215-4291 Phone 614 . 227 . 2300 Fax 614 . 227 . 2390 info@bricker.com www.bricker.com COLUMBUS CLEVELAND CINCINNATI-DAYTON
Student Loan Controversy: Ohio Joins the Nationwide Fray O
n April 24, 2007, Ohio Attorney General Marc While the Ohio investigation focuses on conflicts of interest and illegal conduct within the student loan industry, the inquiry necessarily involves potential conflicts of interest and illegal conduct within the educational institutions as well. For public universities, issues related to Ohio Ethics Laws are implicated just as much for the university employee who accepts a gift as for the student loan lender who offers it. Similarly, non-profit institutions may owe a fiduciary duty to students and to the institution itself which could be implicated if improper gifts or other financial transactions took place. Finally, all colleges and universities should remain vigilant to avoid violations of the Higher Education Act. Some Ohio institutions already have gathered documents in response to Attorney General Dann’s letter and submitted those to the Attorney General’s office. Others are still in the process of doing so. If the activity in New York and elsewhere is any indication, this is only the beginning of what could be a very long process. Colleges and universities must consider the possibility of continuing investigations as they gather and distribute the requested information. At the outset, it is important to preserve documents that are requested, including any electronically-stored data related to Dann issued Investigative Inquiry Demand Letters to all of this state’s public and private four-year and two-year colleges and universities, as well as to several lending institutions. One purpose of the investigation, according to the letters, concerns a school’s decision to place certain lenders on a “preferred lenders” list. Attorney General Dann’s Investigative Inquiry Demand Letters seek a voluminous amount of information related to private student loan products, a school’s financial aid office and practices, and information related to any preferred lender list. The action in Ohio follows a similar investigation by the State of New York into lending practices by student loan lenders in that state. Since the New York investigation began, at least seven other states have started similar inquiries. The United States Congress also has opened an investigation into the matter, recently calling witnesses to testify on lending practices. Congress furthermore has introduced two bills on the subject: the Student Loan Sunshine Act and the Financial Aid Accountability and Transparency Act. The proposed laws seek to prohibit private student loan lenders from giving gifts to colleges and regulate lending practices. In addition, the United States Department of Education is examining the issue and has begun a negotiated rule-making process on the topic.
This document has been prepared as a general reference document for informational purposes. The information contained herein is not intended to be and should not be construed as legal advice. Each circumstance should be considered and evaluated separately, and possibly with involvement of legal counsel. Please contact Bricker & Eckler for permission to reprint this bulletin in part, or in its entirety.
January 2007
Government Relations Client Bulletin
student loans and other transactions with lending institutions, such as e-mails, voicemails, or other spreadsheets, databases, or documents available on the institution’s computer systems. In addition, colleges should consider whether each document is a public record, or whether the information contained in the document is private, preventing disclosure under state and federal law. While the Ohio investigation primarily focuses on the lenders, it is critical that colleges and universities review their own practices and consider any vulnerability they may face in advance of any further investigation. This statewide investigation could
have significant implications for public and private institutions of higher education, as well as for the student loan lending organizations. This is an opportune time for all colleges and universities to conduct an internal review of practices and policies related to student loans and to the acceptance of gifts or travel from lenders or from any vendors who do business with the institution.
For more information please contact Maria J. Armstrong at 614.227.8821 or marmstrong@bricker.com or Luther L. Liggett, Jr. at 614.227.2399 or lliggett@bricker.com.
Government Relations Group
Maria J. Armstrong, Chair 614.227.8821 marmstrong@bricker.com Luther L. Liggett, Jr. 614.227.2399 lliggett@bricker.com Sean A. Mentel 614.227.8892 smentel@bricker.com Miranda C. Motter 614.227.4810 mmotter@bricker.com Terrence O’Donnell 614.227.2345 todonnell@bricker.com Christopher N. Slagle 614.227.8826 cslagle@bricker.com Jeffery E. Smith 614.227.2352 jsmith@bricker.com Oyango A. Snell 614.227.2349 osnell@bricker.com Elisabeth A. Squeglia 614.227.2396 esqueglia@bricker.com Kurtis A. Tunnell 614.227.8837 ktunnell@bricker.com Faith M. Williams 614.227.2374 fwilliams@bricker.com
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