November 28, 2006

Student Loan Industry troubles

Posted in Student Loan News at 11:46 AM by Joe From Boston

There’s never a slow news day it seems, at least in the student loan industry. These two scandals have been brewing for a while, but I held off posting them with all the other crazy news recently.

1) University of Oregon’s student loan programs collapses
2) Arizona governor investigated to being too close (politically) to the overseers of the state student loan program.

1) Audit Blames Failure of U. of Oregon’s Student-Loan Program on Poor Oversight

A student-loan program at the University of Oregon misspent some $1.6-million and was closed this year with nearly $8-million in deadbeat loans, largely because the program was poorly run and checked out potential borrowers with the same inattention that it tracked the use of donor money, according to an Oregon University System audit that was described last week in The Register-Guard, a newspaper in Eugene, Ore. All of the officials responsible for the failed program have retired, so no personnel actions are contemplated. Some of the money in the program, which was separate from the university’s federal student-loan program, may still be collectible, officials said.

2) Governor denies wrongdoing related to student loan group

Gov. Janet Napolitano is denying previous knowledge that two political allies were at the helm of a student loan company established by executive order to handle millions of dollars in college loans.

The Arizona Higher Education Loan Authority was established by a Napolitano executive order in December 2004. The nonprofit provides bonds that finance low-cost, state-backed student loans.

The group’s top officers include United Phoenix Firefighters Association President Billy Shields and former union head Pat Cantelme.

Napolitano spokeswoman Jeanine L’Ecuyer said the governor was not aware until recently that AHELA was headed by the union bosses and that the group was the only one to approach the state offering to provide such loans.

“There’s nothing sinister here,” said L’Ecuyer.

L’Ecuyer said the governor’s office is open to providing state backing and designation for student loan groups similar to AHELA.

In April of 2005, Napolitano vetoed a bill that would have allowed local industrial development bonding authorities to finance and bond for student loans. In her veto letter, the governor said the current system being steered by AHELA is working well and that local bond authorities do not need to get into the college loan arena.

The 2005 bill was sponsored then state Sen. Dean Martin, R-Phoenix, who was elected earlier this month as state treasurer.

L’Ecuyer said the program is overseen by the Arizona Department of Commerce and that agency is looking at the student loan group.

The firefighters union endorsed Napolitano, Democratic Senate challenger Jim Pederson and Democratic congressional contenders Gabby Giffords and Harry Mitchell in the November elections.

Shields was chairman of the state’s 9/11 memorial commission, which was appointed by Napolitano and former Republican Gov. Jane Hull. The 9/11 memorial sparked criticism over some inscriptions that were viewed as anti-American.

Phoenix New Times first reported AHELA’s connection to close political friends of the Democratic governor.


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