Attorney General Martha Coakley's Office Obtains Over $190,000 from Lasell College for Student Loan Borrowers
Attorney General's Student Loan Investigations Have Recovered Over $970,000 for students
Additionally, the Attorney General alleged that there were significant conflicts of interest relating to Lasell's selection of Citizens Bank as Lasell's only "preferred" Stafford lender, including the receipt of gratuities and inducements by Lasell's financial aid employees.
"We are pleased that Lasell cooperated with our investigation and agreed to reimburse students for the extra costs that we believe students incurred by borrowing from Lasell's preferred lender. However, colleges and universities are in a unique position of trust and have a responsibility to provide lending advice that is in the best interest of students and untainted by conflicts of interest. Certainly, no school should ever attempt to restrict a student's abilities to obtain more affordable loans," said Attorney General Coakley.
Under the terms of the settlement, filed yesterday in Suffolk Superior Court, Lasell will pay $191,314 to over one thousand students who received their first Stafford loan disbursement from Citizens Bank in academic years 2003-2004, 2004-2005, 2005-2006, or 2006-2007. The amount of the settlement fund was calculated by the Attorney General's Office based on additional interest charges and fees that students allegedly incurred by borrowing from Citizens Bank rather than a less expensive Stafford lender. Payments to students are expected to range between $25 and $700 and will be issued in the late fall.
The Attorney General's investigation of Lasell's student lending activities found that between 2003 and 2007, despite representing that it would assist students in finding affordable ways to finance their educational expenses, Lasell chose Citizens Bank as its only "preferred" Stafford lender and told Stafford loan borrowers that they were required to borrow from Citizens Bank. For example, in academic year 2004-2005, Lasell provided financial aid brochures to students that stated: "Lasell College works exclusively with Citizens Bank for all Stafford [loans]" and "Please do not complete or forward [to Lasell] a Stafford loan application for any bank other than Citizens Bank. . . ." Lasell allegedly took these actions even though there were other low-cost Stafford lenders that would have provided less expensive loans to Lasell's students.
The Attorney General's investigation also found that between 2003 and 2007, Lasell's financial aid staff and its Office of Student Financial Planning received free goods and services from Citizens Bank, including gifts and entertainment, meals, and printing services. In addition, Lasell's Director of Student Financial Planning was allegedly taken by Citizens Bank on all-expense-paid trips to resort destinations including Disney's Yacht and Beach Club Resort in Florida and Sanctuary on Camelback Mountain in Arizona through her involvement with Citizens Bank's "Educational Finance Advisory Board." Lasell never disclosed these gratuities to the students and parents who relied on Lasell for financial aid advice. Nor did Lasell ensure that these gratuities did not influence Lasell's decision making process in choosing Citizens Bank as its only "preferred" Stafford lender and effectively requiring students to borrow from Citizens Bank.
In addition to restitution, under the terms of the settlement, Lasell has agreed to a set of conduct reforms that are aimed at protecting borrowers' rights, bringing transparency to the student lending process, and eliminating conflicts of interest. The reforms require Lasell to select future "preferred" lenders based on the financial interests of borrowers, prohibit the school from infringing on a borrower's right to borrow from the lender of his or her choice, and prohibit Lasell's financial aid employees from accepting anything of value from a lending institution.
Students who have questions whether they are entitled to refunds under the Lasell settlement can call the Attorney General's Insurance and Financial Services Hotline at 1-888-830-6277.
This resolution is part of the Attorney General's review of unfair and deceptive practices in the student lending industry. The Attorney General's Office reached a similar settlement with Emerson College last summer after conducting an investigation which found that Emerson unfairly steered students to borrow from certain lenders that gave undisclosed inducements to Emerson's financial aid staff, but failed to provide Emerson's students with competitive loan terms.
This matter was handled by Assistant Attorney General Amy Gwiazda, Investigations Supervisor Arwen Thoman, and Economist Bryan Lincoln, Ph.D., all of Attorney General Coakley's Insurance & Financial Services Division.