Ariz. attorney general to launch student loan investigation
PHOENIX - The Arizona attorney general is launching an investigation to determine whether some student loan companies have violated state law by giving incentives to schools in exchange for preferred lender status.
""We have seen evidence in other states that these loans have improperly benefited lenders and schools at the expense of students,"" Attorney General Terry Goddard said in a press release. ""If similar abuses have taken place in Arizona, we will take action to stop them and hold accountable anyone who has acted outside the law.""
The move comes shortly after several schools nationally have been found to have accepted money and in turn given lender companies preferred status, even though they did not offer the best rates to students, the press release said.
Investigations into the loan industry, which generates $85 billion per year, also have been opened in states including California, New York and Wisconsin.
A lender that New York Attorney General Andrew M. Cuomo found to have provided money to schools throughout the country is on the UA convenience list of most used lenders.
But neither that company, Student Loan Xpress, nor any other lenders ever gave and never will give money to the UA, said John Nametz, director of the Office of Financial Aid.
While the UA does not have a preferred lender list, students have the option to pick from a so-called convenience list. Lenders on that list often waive certain fees and offer better rates to students, Nametz said.
The better rates have nothing to do with foul play, Nametz said, adding that they simply stem from competition among lending companies and the UA's reputation that students historically have been reliable in paying off their loans.
""Our students are credit-savvy, so they pick the lenders with good rates,"" he said. ""They have caused some lenders to offer better rates because they pay their loans back.""
Other lenders on the convenience list include Chase, Bank of America, Wells Fargo, Arizona Higher Education Loan Authority and CitiBank.
Goddard will ask at least two student loan companies to show records detailing their partnership with universities, community colleges and other vocational schools.
In a conference call Tuesday, he talked to attorney generals from 40 other states to discuss how best to tackle the investigation.
Goddard's office did not reveal the names of the loan companies being investigated, and spokeswoman Andrea Esquer did not comment on whether there is reason to believe that these companies have broken the law.
""We're in the infancy of this investigation,"" Esquer said. ""We've seen there has been wrongdoing in other states. We want to make sure that students are not being hurt here in Arizona.""
Esquer said she doesn't know when results of the investigation will be made public.
For more information on financial aid and a list of the lenders, visit www.finaid.arizona.edu.