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Video related to this article is available below.Issue date: 4/9/07 Section: News
News Brief: U.S. official suspended in student loan scandal
Jared Miller
Matteo Fontana, a U.S. Education Department senior official, was suspended Friday for holding more than $100,000 worth of stock in a student loan company while he monitored the loan industry.
The Education Department discovered Thursday that Fontana, a general manager in the Office of Federal Student Aid, held shares in 2003 in the parent company of Student Loan XPress.
Fontana has been placed on paid leave indefinitely.
Student Loan XPress is the same company in which senior financial aid officers at Columbia University, the University of Texas and the University of Southern California all were discovered to be shareholders last week.
All three officers have also been suspended indefinitely, pending full investigations.
Columbia also announced that it would no longer recommend Student Loan XPress to its students.
The moves come as part of an expanding investigation of the student loan industry started earlier this year by New York state attorney general Andrew Cuomo.
Penn has also been implicated in the investigation, though to a far less egregious degree than the most recent developments.
The University settled with Cuomo last Monday for $1.6 million after Cuomo discovered that Penn officials had not disclosed its revenue-sharing agreement with Citibank.
In that agreement, the University received 2 percent of each loan that students took out from Citibank's loan program, CitiAssist.
Penn officials said that they had been placing the money in its pool of financial aid and have since ended the agreement.
Cuomo also settled with 34 other universities that had similar agreements with Citibank.
He has also stated that he is actively investigating the loan practices of over 100 other universities and six lenders, calling the situation an "unholy alliance" between schools and banks.
Alleged activity ranges from all-expense paid trips for financial aid officers to the outsourcing of financial aid call-centers to loan companies.
Leading Democrats in Washington, including Rep. George Miller (D.-Calif) and Sen. Edward Kennedy (D-Mass.), have called for a further investigation and the bolstering of current laws in an attempt to clean up the industry.
The Education Department discovered Thursday that Fontana, a general manager in the Office of Federal Student Aid, held shares in 2003 in the parent company of Student Loan XPress.
Fontana has been placed on paid leave indefinitely.
Student Loan XPress is the same company in which senior financial aid officers at Columbia University, the University of Texas and the University of Southern California all were discovered to be shareholders last week.
All three officers have also been suspended indefinitely, pending full investigations.
Columbia also announced that it would no longer recommend Student Loan XPress to its students.
The moves come as part of an expanding investigation of the student loan industry started earlier this year by New York state attorney general Andrew Cuomo.
Penn has also been implicated in the investigation, though to a far less egregious degree than the most recent developments.
The University settled with Cuomo last Monday for $1.6 million after Cuomo discovered that Penn officials had not disclosed its revenue-sharing agreement with Citibank.
In that agreement, the University received 2 percent of each loan that students took out from Citibank's loan program, CitiAssist.
Penn officials said that they had been placing the money in its pool of financial aid and have since ended the agreement.
Cuomo also settled with 34 other universities that had similar agreements with Citibank.
He has also stated that he is actively investigating the loan practices of over 100 other universities and six lenders, calling the situation an "unholy alliance" between schools and banks.
Alleged activity ranges from all-expense paid trips for financial aid officers to the outsourcing of financial aid call-centers to loan companies.
Leading Democrats in Washington, including Rep. George Miller (D.-Calif) and Sen. Edward Kennedy (D-Mass.), have called for a further investigation and the bolstering of current laws in an attempt to clean up the industry.
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