Cuomo Cracks Down On Loan Rangers
As any parent knows, the cost of a college education has grown exponentially over the last quarter-century. As tuition has gone up, the government’s commitment to financial assistance has gone down, forcing millions of students to rely on conventional loans. It’s not unusual for students to be handed a six-figure liability along with their degree.
Student loans are an $85 billion a year industry, and the competition is intense. Many colleges and universities designate certain private companies as preferred lenders, which means they are perceived to have the institution’s blessing. In a better world, perhaps, universities would recommend lenders based on their commitment to easing the burden of debt on students. Unfortunately, grosser considerations may play a role in these designations.
State Attorney General Andrew Cuomo has opened a potentially explosive investigation into the relationship between university officials and the companies that make private student loans. Mr. Cuomo’s probe has uncovered some pretty sleazy details. For example, the directors of financial aid at Columbia University and two other major schools, the University of Texas at Austin and the University of Southern California, owned stock in a company which the university designated as a “preferred lender.”
What’s more, an official in the U.S. Department of Education, Matteo Fontana, has been placed on leave after Mr. Cuomo’s probe revealed that he owned over $100,000 in stock in a student-loan provider. Mr. Fontana, wouldn’t you know, is the official in charge of supervising the student-loan industry.
At Columbia, the financial-aid officer, David Charlow, made over $100,000 from selling shares in a company, Student Loan Xpress. The company, currently owned by CIT Group in Livingston, N.J., certainly has done well as a result of its preferred status—it accounts for nearly 40 percent of loans taken out by Columbia students.
Mr. Cuomo has issued subpoenas to Student Loan Xpress and the CIT Group, to find out if this unseemly partnership between private companies and college financial-aid offices is widespread. The attorney general’s investigation is an outgrowth of an earlier probe into lending practices between Citibank and several universities, which led the bank and the schools involved to agree to new rules governing their relationship. The new investigation, centered for the moment on Student Loan Xpress, is far more incendiary. Mr. Cuomo is trying to ascertain if private lenders paid kickbacks to school officials who steered student borrowers to those lenders.
It’s becoming clear that, far from overseeing a neutral, objective service for cash-strapped students, many financial-aid directors have been looking to line their own pockets. Mr. Cuomo is well advised to pursue this inquiry wherever it may lead.
Indian Point: Hazard on the Hudson
On April 6 at 11:43 a.m., the company that owns the Indian Point nuclear plant reported an “unusual event” at the No. 3 reactor. These are, needless to say, not comforting words to hear when they refer to a nuclear reactor—particularly one located 35 miles from midtown Manhattan, and one with an abysmal history of safety problems. Twenty million Americans live within a 50-mile radius of Indian Point; a 2004 study concluded that a terrorist attack on the plant could kill 44,000 people right away, cost the U.S. economy $2.1 trillion, and cause the long-term cancer deaths of 500,000 people.
The “unusual event” last Friday wasn’t a terrorist attack, thankfully, but rather a fire. While no injuries were reported, the fire forced the plant’s fourth unplanned shutdown in 12 months. If that sounds troubling, it is: The national average is fewer than one shutdown per year. Meanwhile, the plant has been found to be leaking radioactive fuel into the surrounding soil and, most likely, the Hudson River. And if that doesn’t keep you up nights, consider that, in a recent test, the plant’s alarm sirens failed to work. This week, the Nuclear Regulatory Commission downgraded its safety assessment of Indian Point’s No. 3 reactor and will be sending inspectors to the site.
The owner of Indian Point, the $10 billion, New Orleans–based Entergy Corporation, doesn’t want you to think about these things. Entergy is hoping to extend its lease on the plant by 20 years. This model corporate citizen also doesn’t think it should help to pay for the cost of protecting Indian Point: A proposal from Governor Eliot Spitzer calling for the owners of New York’s nuclear plants to contribute $13 million towards the security provided by the National Guard was rejected last week by the State Legislature, thanks to ferocious lobbying by Entergy.
This is outrageous: The owners of nuclear plants should be paying a share of the cost of keeping them safe. Terrorists would stop at nothing to use Indian Point as the ultimate weapon of mass destruction. Moreover, Entergy reaps huge profits from Indian Point; it’s absurd that New York taxpayers should foot the entire bill for protecting the plant from attack.
Entergy’s ability to seduce New York’s elected officials is appalling. The company’s political-action committee has contributed over $130,000 to New York’s politicians and political parties, including State Senate Republican James Wright, who happens to chair the Senate’s energy committee and fought against the safety proposal. Mr. Wright has shown his true colors by putting his pocketbook ahead of the safety of his constituents. He and his colleagues should be ashamed of themselves.
Entergy has also contributed money to Mr. Spitzer—but his safety proposal, though defeated, shows that he is not beholden to the industry. We trust that, unlike former Governor George Pataki, Mr. Spitzer will confront Entergy’s executives and give them something to think about. And maybe it will be their turn to lie awake nights.