Attorney General's News Release

April 23, 2007

Nixon inquiry into student loan practices continues; agreement reached with Washington University

St. Louis, Mo. — Attorney General Jay Nixon has reached an agreement with Washington University in St. Louis to ensure that the university’s students and their families who borrow money for education costs are adequately informed and protected when choosing a lender.

The agreement with Washington University comes as Nixon’s office continues its inquiry into lenders and higher education institutions in Missouri. Last month, the Attorney General’s Office sent out civil investigative demands to colleges, universities and technical and trade schools across the state, as well as lenders across the country, as part of the information-gathering process.

Nixon is concerned about, among other things, students being steered by universities to “preferred lenders” without the students and their families receiving information about how those lists were compiled; revenue-sharing arrangements that reward institutions of higher education that put lenders on such lists; and gifts being given by lenders to institutions of higher education or their employees.

“Students and their parents often are presented with limited choices and information on lenders,” Nixon said. “They may feel unempowered as consumers, being steered to particular lenders without receiving sufficient data to make fully informed choices. We want to make certain our concerns about students being able to make informed decisions to get the best loan interest rates are fully addressed.”

The inquiry found that Washington University had a revenue-sharing provision with lender Education Finance Partners (EFP), but the university ultimately did not receive any income under the agreement.

Under the assurance of voluntary compliance filed today in St. Louis County Circuit Court, Washington University will abide by a Code of Conduct regarding its relationships with lenders. The code includes:

• A prohibition on remuneration to the school, specifically through revenue-sharing agreements, and a prohibition on remuneration to school employees.
• Required disclosures related to preferred lending lists. The school would be required to adequately inform students and their parents of the school’s decisions regarding its preferred lender list.
• A prohibition on steering students to certain lenders’ master promissory notes (MPNs). Students are often provided MPNs in paper or electronic form. The Code of Conduct will ensure that the lender box on the MPN is not pre-selected, so the student has the opportunity to enter his or her own choice.
• A limitation on school employees’ participation on lender advisory boards in exchange for compensation or reimbursement of any expense.

Washington University also agreed to cooperate with any further investigation by the Attorney General’s Office into matters regarding lending practices.

“I appreciate the cooperation we received from Washington University during this inquiry,” Nixon said. “I hope their agreeing to abide by this Code of Conduct serves as a model for other institutions of higher education across Missouri as our inquiry continues. Many Missouri families are struggling to meet the costs of higher education. This code will help ensure that students and their parents are able to make informed choices about borrowing that are best for their particular situations.”

Nixon said he is working with other Attorneys General around the country as they look into lending practices and how they affect students and their families. New York Attorney General Andrew Cuomo today announced a similar agreement with Washington University; the Missouri and New York Attorney General Offices cooperated on reaching their settlements with the university.

Download Stipulation and Assurance of Voluntary Compliance

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to the Press Secretary.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818