WASHINGTON -- In his first appearance before Congress since taking office in January, New York Attorney General Andrew Cuomo accused the Education Department of failing to protect students from predatory lending practices.
"The U.S. Department of Education has been asleep at the switch," said Cuomo, who said teenage students typically borrow tens of thousands of dollars through loan mechanisms that are less regulated than their parents' home mortgages.
Cuomo said he is looking into possible criminal charges against financial aid officers who profited from "kickback schemes" that preyed on student borrowers.
Spitzer said JP Morgan Chase and Bank of America have agreed not to engage in questionable student lending practices, bringing those that have agreed to 16 colleges and four lenders.
In March, Cuomo unveiled a nationwide investigation that alleged lending institutions were offering trips, stocks and other inducements to individual college financial aid officers in exchange for being included a college's "preferred lender" list.
Cuomo said Wednesday that some colleges had agreed to place specific lenders on their preferred list in exchange for a percentage of the profits from loans that lenders made to their students at the college -- which Cuomo said drove up the cost of student borrowing.
Cuomo said 90 percent of students choose loan packages based on preferred lists.
In a statement Wednesday, Education Secretary Margaret Spellings denied that her agency had been lax. On Tuesday, she organized a task force on student loans to examine the practice of "prohibited inducements" and preferred lender lists.
Cuomo received a warm welcome from committee Democrats, including Carolyn McCarthy (D-Mineola) and Tim Bishop (D-Southampton).
"It's like being on the take," McCarthy said of college officials who accepted benefits from lenders. "I'm at a loss that people couldn't see that something was wrong."
Lee Miringoff, assistant professor of political science at Marist College, said the hearing could help Cuomo establish a political image as a hard-hitting activist in the mold of his predecessor, Gov. Eliot Spitzer.
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