On April 2, New York Attorney General Andrew Cuomo announced that Penn was one of five universities that would reimburse student borrowers to settle an investigation into suspect loan practices. For the past two years, according to University executive vice president Craig Carnaroli W’85, Penn has had a revenue-sharing agreement with Citibank, one of its preferred lenders. For certain loans—primarily those taken out by international and graduate students who do not qualify for financial aid—the bank paid Penn 2 percent of the loan value without disclosing the practice to the students borrowing the money. This revenue was then being used to bolster the financial-aid budgets of various schools within the University, Carnaroli said.
Cuomo described the practice as a conflict of interest. Penn admitted no wrongdoing, but will repay a total of $1.6 million to approximately 3,000 borrowers and discontinue the practice. Citibank agreed to pay $2 million into a fund to educate student borrowers, and will retain its preferred-lender status at Penn. Cuomo’s investigation is ongoing, with over a hundred other universities under scrutiny for practices ranging from student- loan officers accepting gifts and perks from companies whose products they were recommending to the outsourcing of college financial-aid call centers to phone banks run by preferred lenders. Penn maintains that its officials have not engaged in such behaviors, and that by modifying its past agreement with Citibank, the University will be in full compliance with the New York attorney general’s new College Code of Conduct. —T.P.
