An American University financial adviser accepted a dinner cruise from one of the nation’s largest student lenders, a practice that lawmakers are trying to bar as Congress investigates unethical practices of the student loan industry.
The lender, JP Morgan Chase, paid more than $70,000 for a July Fourth harbor cruise in New York for financial aid officers from 81 schools during a conference in 2005, according to documents provided by Rep. George Miller, D-Calif. The financial services company also hired officials from five colleges to perform services even as the officials remained on their schools’ payrolls.
American University spokeswoman Maralee Cseller said JP Morgan Chase is not a listed lender for the Northwest Washington school. Four financial aid officials from AU attended the national conference in New York and one worker took the $459 cruise, Cseller said. The finance official has since left the university.
The school has no policy that prevents employees from attending vendor-supported functions, but Cseller said the university will consider new rules while it examines the student loan practices.
Miller, the chairman of the House Education and Labor Committee, questioned Secretary of Education Margaret Spelling on Capitol Hill on Thursday and blamed the Education Department for allowing conflicts of interest to flourish.
“At a time when students andparents are going into serious debt to pay for college, it is wrong for lenders to pick up the tab for lavish cruises held under the guise of a financial aid conference,” Miller said.
Spellings told the hearing that system needed to change.
“Federal student aid is crying out for reform,” she said. “The system is redundant, it’s Byzantine, and it’s broken.”
The House passed a bill Wednesday that would prevent lenders from giving gifts to colleges or administrators and would require schools to disclose all financial ties to lenders.
Institutions of high education around the country have reassessed their student loan initiatives since New York Attorney General Andrew Cuomo revealed in March that colleges and universities had received cash payments and other incentives for steering student customers to “preferred” lenders.
