Loan probe hits three Michigan universities

WSU, U-D Mercy, CMU among 40 universities to be subpoenaed in athletic department investigation.

Marisa Schultz and David Goricki / The Detroit News

The nation's growing student loan scandal has reached the athletic departments of three Michigan universities.

New York Attorney General Andrew M. Cuomo issued subpoenas Wednesday to 40 universities, including Central Michigan University, University of Detroit Mercy and Wayne State University, questioning whether their athletic departments received kickbacks in exchange for steering students to a specific student loan provider.

The universities have advertising agreements with University Financial Services, a loan company that has become a focus of Cuomo's probe into questionable lender practices. None of the schools admitted wrongdoing Wednesday.

"To date, we have received no financial compensation as part of this agreement," said Gary Lichtman, spokesman for U-D Mercy, noting it partnered with UFS at the request of the Horizon League.

University Financial Services is accused of having too cozy a relationship with Dowling College in New York, where it would pay the athletic department $75 for each loan application that was steered its way. In exchange, the university put UFS ads on its athletics Web site and let department interns distribute promotional materials at events, according to Cuomo.

"We've made sure we've stayed very clear of that type of thing," said Wayne State University Athletic Director Rob Fournier, noting that when a company buys university ad space, it doesn't mean the university endorses that product.

But the university wants to avoid any appearance of impropriety. "We've had (internal) talks the last few days on if we should continue to be associated with them. We probably won't continue it so we can remove all doubt," Fournier said.

Under the subpoena, the universities are to turn over all documents relating to their relationship with University Financial Services. If the athletic departments endorsed UFS based purely on payments from the lender and not by evaluating the interest rates, then they would violate New York state consumer protection and federal laws, according to Cuomo's office.

"Students trust their university's athletic departments because so much of campus life at Division I schools centers around supporting the home team," Cuomo said in a statement. "To betray this trust by promoting loans in exchange for money is a serious issue."

At CMU, UFS has had a presence on the school's athletics Web site for about a year, according to spokesman Steve Smith, noting the university received the seven-page subpoena Wednesday by fax.

By clicking on the advertisement that says: "Save Money! Lower your student loan payments by as much as 50%," users are directed to the UFS loan consolidation site.

"Sure, we're concerned about it," said Central Michigan Athletic Director Dave Heeke. "They are one of our Web site advertisers and we have a sponsorship agreement with them. To my understanding they have paid a lump-sum fee and nothing more."

Dowling has since terminated its relationship with UFS. But the discovery has prompted the attorney general to investigate other UFS relationships throughout the country.