Capella University Loan probe

THought you all would find this interesting...



A financial aid official with the online university is alleged to have also been on the payroll for a student lending agency.

By Norman Draper and Mary Jane Smetanka, Star Tribune


A nationwide investigation into deceptive college loan practices has arrived in Minneapolis, implicating the financial aid director for Capella University.

Timothy C. Lehmann was placed on leave Tuesday pending the results of an investigation into a potential conflict of interest, Capella President Michael Offerman said. Capella is a for-profit online university with offices in downtown Minneapolis and a worldwide enrollment of 18,000 students.

According to a letter sent to Capella by the New York attorney general's office, Lehmann is being investigated for doing consulting work for a student lending agency, Student Loan Xpress Inc., at the same time he was working for Capella.

The letter cited a concern that Lehmann "may have received payments" for making the company one of its "preferred lenders."Students may therefore have been left with the false impression that SLX [Student Loan Xpress] was preferred because it was the best for students and their parents when in reality the company was selected, at least in part, because of its payments to Mr. Lehmann," the letter said.

Offerman said Tuesday that Capella discovered the potential conflict last Friday while doing its own investigation. He said his "understanding" was that Lehmann made $12,400 as a consultant for SLX between late 2005 and early 2006.

Lehmann and officials with the San Diego-based Student Loan Xpress could not be reached for comment.

Last month, Minnesota Attorney General Lori Swanson contacted the state's 350 colleges and universities inquiring about payments or other inducements their financial aid offices might be receiving from college loan providers. Swanson's spokesman Brian Bergson declined to discuss the status of the investigation.

The investigations come as student debt has become a nationwide concern and the Minnesota Legislature is looking for ways to relieve the burden of loans and rising tuition.

According to the New York attorney general's office and Capella officials, Lehmann also serves on the SLX advisory board. That, Capella officials say, is an unpaid position.

"What I can say is we take this very seriously," Offerman said. "Any time there's the appearance of a conflict we're concerned about that."

Lehmann is the only Capella employee being investigated, he said.

Capella University, founded in 1993, offers more than 760 online degree courses.

Capella launched a review in response to the New York investigation. "We decided to take a look at the way we had policies set up in our relationships with lenders," Offerman said.

He said 15 of its 150 lenders are on a list of lenders they recommend. He said SLX has been on the list for five years, before the time Lehmann was alleged to have received payments for his consulting services.

In 2005, private lenders made more than $623 million in educational loans to Minnesota undergraduates. About $484 million was in federal Stafford loans, while $139 million was in so-called "alternative" private loans that students use to fill gaps in paying for their education.

Because student loans are a growing, lucrative and predictable source of income, lenders covet a spot on colleges' preferred lending lists. Five-year-old SLX ranks eighth nationally as a provider of federal student loans and has been especially aggressive in seeking that business.

Since the New York probe began, financial aid officials at Johns Hopkins University, the University of Texas at Austin, Columbia University, the University of Southern California and Widener University in Pennsylvania have been investigated or disciplined.

So far, Capella is the only Minnesota-based institution to surface in the investigation.

The University of Minnesota is a direct provider of federal loans, so it does not list preferred providers for those loans. But SLX is on the websites of the Twin Cities, Morris and Crookston campuses as a lender of last resort. Kris Wright, director of the Office of Student Finance, on the Twin Cities campus, said SLX and similar firms are on her website because students have used them and because their financial systems are compatible with the U's computers.

Augsburg College in Minneapolis is not a direct federal lender and works with banks to provide loans to students. SLX is not on its list of federal or alternative loan providers.

"Student Loan Xpress has bothered me as a little predatory," said Paul Terrio, director of student financial services. "They send out unsolicited mail to students, offer to take loans or consolidate loans, and they say 'We're the best.' We like to work with people we're more comfortable with."

James Morales, associate vice chancellor for enrollment at the U's Morris campus, like Wright and Terrio, said he has not been offered any kind of benefit by a lender and would quickly refuse such an offer.

"It strikes me that [officials who have accepted such offers] have lost sight of why we do what we do in our profession," Morales said.

Kathy Ruby, financial aid director at Northfield's St. Olaf College, said SLX is on their preferred list because "they had a competitive product."

Ruby said she saw "nothing but ethical behavior from any representative we've worked with from Student Loan Xpress." She is worried that the actions of a few bad apples will shake the trust of families trying to figure out how to afford college.

"It's unfortunate that situations like this make it look like we're offering guidance that's not in the student's best interest but in our own best interest, she said."


Staff writer Kara McGuire contributed to this report. [email protected] • 612-673-4547 [email protected] • 612-673-7380

©2007 Star Tribune. All rights reserved.

 

As a Capella learner - it looks to me that Capella is handling the situation properly. Capella received information from a government agency, conducted a preliminary investigation, and put the Financial Aid Director on administative leave pending a more thorough investigation. Until the investigation is complete, Capella should be given the benefit of the doubt on how the school handles this.

And as the article states, this is not a DL or proprietary school issue.

Shawn

 

Capella Rock there is no need to go on the defensive each time a poster presents some news/information that pertains to your alma mater. In fact the news article does not reflect negatively on your school but your constant need to leap to the defense of your school does raise a red flag as to your need to do so if you were so confident in your school.

Until certain posters understand, no matter what online school they attend, that by becoming defensive each time someone mentions their school and attempt to stop any further discussion of the isssue presented, does not reflect well on the school in question or the motives of the poster doing the defending.

 

If the director is found guilty, then he should be fired. I believe Capella has responded appropriately and correct disciplinary action will be taken.

 

I’m just sure that Cappella feels good being mentioned in the same news article as “. . . Johns Hopkins University, the University of Texas at Austin, Columbia University, the University of Southern California and Widener University in Pennsylvania . . . ”

 

Simon,

Didn't mean to come off defensive - just wanted to give my perspective on this as a current Capella learner. Often times on discussion boards there is a rush to judgement and what I was trying to convey was in my mind, the school is doing the right thing and that until the investigation by Capella and New York State is complete is that we shouldn't draw conclusions. Hope you accept this in the spirit I am trying to convey this in

Shawn

 

Hi Shawn, I appreciate your staightforward response. As you may have observed whenever anyone broaches ANY issue or experience regarding Capella that is not perceived as being positive by several posters who are or were Capella Alumi they immediately launch aggressive defensive pre-emptive attacks that are totally unnecessary or justified! This is a forum where many posters wish to have an opportunity to openly discuss the positive, neutral and the the not so good about many distance degree programs. Therefore, ANY poster/student of a particular school who attempts to impede such dialogue due to their misperception that divergent opinions about their school implies bad things, need to recognize that this in fact is not the case. Either they need to back off and allow the discussion to flow or recuse themselves because such defense outbursts really is an embarassment and reflects poorly on their respective schools. Regards, Carl

 

Simon,

No problem - and I agree. Take care.

Shawn

 

Simon,

Have you thought that every time you jump on someone for clarifying or "defending" their school that you are doing exactly the same thing. Your motives are in question just as much and your words do not reflect well. Just a thought.

 

I think it more then just Capella's problem. I found this article in the Milwaukee Journal.....

http://www.jsonline.com/story/index.aspx?id=589837

UWM official quits loan board

She says she's shocked by disclosures on company

By MEGAN TWOHEY
[email protected]

Posted: April 10, 2007

Jane Hojan-Clark, the director of financial aid at the University of Wisconsin-Milwaukee, resigned Tuesday from the advisory board of a private loan company, saying she was "shocked" by recent disclosures of the company's financial ties with other board members.

More Coverage
The Journal Sentinel's team of education reporters provides regular news, notes and links of interest on the beat covering K-12 through higher education.

But Provost Rita Cheng said the university would continue to list the company, Student Loan Xpress, as a preferred lender to student borrowers because the company provides "great service to students and families."

The move came as Kevin Reilly, president of the UW System, asked the system's financial aid directors to reveal their student loan practices in light of an investigation by New York Attorney General Andrew Cuomo that has uncovered conflicts of interest and potential illegal conduct within the student loan industry.

In a memo sent Tuesday, Reilly told the financial aid directors that the system would create a code of conduct governing student loans that would build on recommendations by Cuomo. Among other things, Cuomo recommends that universities prohibit employees from taking anything of more than nominal value from a private lender, including paid trips.

Student Loan Xpress paid for Hojan-Clark to attend conferences in Ohio and New York City, covering the cost of airfare, hotel and meals.

But UWM maintains there was nothing wrong with the paid trips. Cheng said Hojan-Clark's decision to resign from the Student Loan Xpress advisory board was based solely on concerns about the actions of other board members.

"Jane has asked, and we've agreed, that it would be appropriate to distance ourselves based on what we're seeing in the press," Cheng said.

This week, CIT Group Inc., the parent company of Student Loan Xpress, placed three top executives on leave pending an internal investigation of their transactions with members of the advisory board.

The executives of Student Loan Xpress are accused of selling stock and paying consulting fees to financial aid directors from several universities. The universities listed the company as a preferred lender.

The executives also sold stock to a high-ranking official in the U.S. Department of Education who oversees student loan programs. The department has placed the official on leave and is conducting an investigation.

In her resignation letter to Student Loan Xpress, Hojan-Clark said she "was shocked and surprised by recent media reports of allegedly inappropriate conduct by other Student Loan Xpress Advisory Council members."

She did not, however, suggest that the company had done anything wrong.

There is no university in the country that does more business with Student Loan Xpress than UWM, according to Student Marketmeasure, a New York-based firm.

In fiscal 2006, the company managed $72.5 million in federal loans taken out by UWM students - 55.5% of the university's federal loan volume.

UWM said it needed only one preferred lender when it switched from a system in which federal loans were made directly by the government to a program in which the loans are made and managed by private lenders. It said Student Loan Xpress was selected because it offered the most benefits to students and the university.

Hojan-Clark said she joined the advisory board of Student Loan Xpress after it was selected because she wanted to convey the needs of student borrowers. She said neither she nor any other financial aid managers own stock in Student Loan Xpress or any other private lender.

But some student loan experts have questioned the university's relationship with the company, saying it may violate federal law that prohibits lenders from offering "inducements" to students or colleges to secure loan applications or a certain loan volume.

This year, the university expanded its list of preferred lenders to include five other companies, but Student Loan Xpress still stands out. The company is first on the list. It prints the university's financial aid handbook.

David Giroux, a spokesman for Kevin Reilly, said the UW System president had no reason to suspect problems with student loan practices at any of its campuses. Giroux said Reilly had called for a review of student loan practices because "we want to make sure that there is nothing that even appears improper."

Cheng said UWM had no reason to stop recommending Student Loan Xpress as a preferred lender.

"If there are people who have done inappropriate things, that hasn't changed our opinion about what's best service for students and parents at this point," she said.

 

Lo and behold, Blackbird has just reinforced the exact issue I am addressing! It is an example of his knee jerk reactiveness, defensive posturing and his readiness to engage in counterattacks rather than listening intently to relevant feedback that is the basis for all of us participating in this forum!

With all due respect Blackbird, and I mean this sincerely because you are not a bad guy, but you and a couple of other posters have a proclivity to impulsively jump on anybody who presents any information, experiences or news about your alma mater without one pause or willingness to explore the basis of their presentations and position. IT IS OVERKILL my friend and this issue needs to be addressed because it is preventing an open and honest dialogue of issues that is the basis for posters' participating on this forum. In other words it is a form of censureship but in fact you have appointed yourself as censor and this does not reflect well on you and is definitely depriving other posters of their right to disagree or express divergent opinions without the tension of having to deal with ANY other poster's unjustified defensive posturing.

I can understand if a poster comes across with an axe to grind and is literally out to defame or denigrate a school with no basis resulting in students of that institution responding assertively and defensively. However Blackbird, this has not been the case in many previous discussions and a number of threads had to be aborted due to the interjection of inordinate levels of defensiveness resulting in petty arguments. You have earned a Ph.D from your alma mater. It is a major attainment. However with all due respect, this is not the manner or decorum a Ph.D should be demonstrating. Instead one on your academic level should be modeling a level of openess and willingness to explore the intent of other posters' positions prior to attempting to block/impede their right to explore issues that are relevant to them and fellow posters on this board. Simon

 

Guys, folks, ladies, electronic participants, comic characters, aliens, paranormal phenonemons, planet x inhabitants, stay on topic please. Note that the original poster has yet to submit a response. Hortonka? Why do you find this article interesting?

 

Again with the knee jerk jerk ...

Knowing full well I will be lumped into Simon's imaginary "Capella Defense League," I nevertheless think it is important to point out that this is indeed a national issue.

The quoted story, from the Minneapolis Star-Tribune, attempts to put a local spin on it, as Capella is based in Minneapolis.

As capably reported by Inside Higher Education, Capella (unfortunately) joins the ranks of esteemed conventional colleges whose financial aid directors/departments are being investigated for having questionably cozy relationships with loan providers.

Capella's response appears to be reasonable and responsible, and similar to that taken by the other affected universities.

It, nevertheless, is unfortunate that even with mentions of the nationwide probe, the quoted article's local focus on Capella could give the uncautious reader the impression it is a story about Capella specifically.

 

PsychPHD: "Again with the knee jerk jerk".

Simon: Projection?

In fact the article in question does not negate Capella at all BUT focuses on a fact that one of their officers was involved in illegal activities. No more, no less. What is the news press to do, not present the news as it actually occurred because there are alumni who do not like hearing anything negative that occurred in their alma mater resulting in their inordinate level of defensive posturing? The answer is self-evident.

 

Though the thread title suggests that this financial aid scandal is a Capella-specific issue, in reality it's much broader than that. It extends all across American higher education. Apparently the story in the original post is from a Minneapolis newspaper and emphasizes Capella simply because it's a local school.

Here's an AP story that takes a wider view:

http://biz.yahoo.com/ap/070410/student_loan_probe.html?.v=8

Highlights from the story, with color highlighting added by me:

The Minneapolis newspaper story adds Johns Hopkins University, the University of Texas at Austin, Columbia University and the University of Southern California to the growing list.

On the basis of the published reports, this indeed sounds like a corrupt and unethical practice. I suspect that it extends well beyond the handful of financial aid officers who will no doubt be made the scapegoats. Top university adminstrations doubtless knew that these things were happening and approved.

The appalling thing is that many, perhaps most American universities may have been doing similar things. As the NY AG said, it's the rule, not the exception. Apparently administrators and financial aid officials across the breadth of higher education saw kickbacks from predatory lending as an industry-standard way of doing business.

That could say something very ugly about American higher education. If university administrators saw nothing wrong with screwing their own students in financial aid offices, then how many other places are those students being screwed?

 

Message vs. messenger

Nope, observation based upon lengthy experience with your inexplicable biases and intractably unprofessional demeanor.

Apparently, only to you "dear friend."

It is quite frankly pathetic that you are unable to notice that you (and you alone) insist on focusing on the messengers and ignore the message.

No one else on this thread has said anything remotely as ad hominem as you have. Several others on the thread have acknowledged that the article and thread title are presented in such a way that one might incorrectly infer this is a problem specific to a particular university. Several others -- Capella affiliated and not -- have made reasonable efforts to clarify that this issue is not limited to one university but part of a national investigation.

Still, you insert yourself as the self-appointed arbiter of knee-jerk defensiveness while simultaneously ignoring your own application of the very same behavior. Why are you so instantaneously insensed the moment anyone say anything remotely supportive of Capella? Did a Capella student steal your lunch money or what?

I have wasted much of my time hoping that reason and empirical evidence would help you come to a more appropriate level of critical thinking.
Your most recent "contribution" has provided ample evidence of the futility of that effort.

We can only hope that others are able to see through your false civility and appreciate your disingenuous arguments for what they are.

 

The above rantings, false counter-accusations, out of control anger and hostility are exactly the signs of hyper-defensiveness that I am alluding to. It is unfortunate that individuals who are trained in Psychology at the doctoral level are unable to have any insight as to the level of their defensiveness and the means they employ to parry ANY information that makes them feel insecure about their school and their degrees.

Until individuals who recieve distance online degrees can react with composure and equinimity to any PERCEIVED criticism of their school and be able to process this information with an air of openess and receptivity, without immediately launching into vehement defensive protestations, there will always be questions as to the underlying reason for this hyper-reactive response to relatively insignificant issues pertaining to their school. As mentioned previously it does not reflect well on these individuals as representatives of their respective schools and actually makes one feel as if our degrees from distance learning schools need to be defended when in fact they don't!

 

I, for one, do.

 

Your answer didn't read defensive to me, merely a response to a posting of a distressing story. Essentially the same thing I would have said if the B&M school for which I work were among those being investigated.

Regards,
GME