A top financial aid officer at the Johns Hopkins University has resigned after an internal investigation concluded that she had violated conflict-of-interest policies and received consulting fees from student loan providers, the college announced yesterday.
Ellen Frishberg has been on paid leave since April 9, when the private Baltimore university learned that she had received about $65,000 in consulting fees and graduate school tuition from Student Loan Xpress Inc. of San Diego, a lender recommended by Frishberg's office to students and parents.
The university revealed yesterday that Frishberg also received about $2,400 in undisclosed consulting fees from American Express between 1997 and 2002. Hopkins endorsed the company's student loan products during this period.
Frishberg also was a paid consultant for several lenders that were not recommended to students, and one such relationship was approved by the university, officials said yesterday. She also was a paid consultant to the U.S. Department of Education, which makes direct loans to Hopkins undergraduates, said spokesman Dennis O'Shea.
Frishberg, an 18-year veteran of the university who oversaw aid programs for the schools of arts and sciences and engineering and was well-known in financial aid circles, did not return calls seeking comment yesterday.
Her attorney, David Kasakove, said she "never intended to do anything that would be perceived as harmful to either Johns Hopkins University, its students or their parents, and has always acted in good faith."
Sen. Edward M. Kennedy, a Massachusetts Democrat who is leading the effort for legislative reform, applauded Frishberg's resignation.
"It is apparent that Dr. Frishberg had multiple financial conflicts of interest with her duties as a financial aid officer," Kennedy said in a statement. "College and university officials must be vigilant in assuring that such conflicts do not taint the system of higher education financing."
O'Shea said yesterday that William Conley, dean of enrollment and academic services, would assume Frishberg's duties on an interim basis.
Frishberg is one of several top university officials nationwide implicated in recent months in a sweeping investigation launched by New York state's attorney general, Andrew M. Cuomo, into the $85 billion student loan industry.
Nearly a dozen state attorneys general, members of Congress and the U.S. Department of Education are now looking into whether undisclosed financial arrangements between schools and lenders - particularly as they relate to "preferred lender" lists commonly compiled by universities - undermine the best interests of students and their families.
"Every day there's a new revelation, so I don't think this is going to end any time soon," said Mark Kantrowitz, publisher of FinAid.org, a student aid information Web site.
Last week, the University of Texas at Austin fired its financial aid director, Lawrence Burt, after concluding that his undisclosed ownership of stock in the former parent of Student Loan Xpress - also a preferred lender at that university - violated ethics rules, college officials there said.
On May 9, the U.S. House of Representatives overwhelmingly passed the Student Loan Sunshine Act, which would require colleges to adopt a code of conduct that would bar payments and gifts from loan companies to college officials.
Late last month, Hopkins announced that it would adopt a code of conduct established by Cuomo and that it would temporarily stop recommending lenders to students.
The problem with cozy relationships between lenders and colleges, according to critics, is that schools might have an incentive to steer students and their parents away from nonpreferred lenders with better interest rates or lower fees. Though most student loans are federally backed products with interest rates capped by the government, private providers compete on fees, repayment terms and customer service.
In a statement, Hopkins said yesterday that its investigation has "found no evidence that any student or parent borrower was harmed financially because of any arrangement between Frishberg and a lender."
The loan terms offered by Student Loan Xpress "were competitive and in fact advantageous for students," said O'Shea, the spokesman.
There is also no evidence that other Hopkins officials knew about the $65,000 in consulting and tuition payments made to Frishberg by Student Loan Xpress between 2002 and 2006, officials said.
During the course of the internal investigation, Frishberg told Hopkins officials of other paid consulting relationships with lenders not endorsed by the university, O'Shea said. He declined to identify the companies involved or how much they paid Frishberg.
One such consulting arrangement had been approved by the university, O'Shea said. While that arrangement would violate the college's newly adopted code of conduct, it was sanctioned at the time because the lender in question was not on Hopkins' preferred lender list, he said.
In addition to her advisory work for private loan companies, Frishberg was a paid consultant to the Education Department, which since 1995 has made Stafford loans directly to Hopkins undergraduates, according to O'Shea.
O'Shea said he did not know when Frishberg consulted for the department or how much she was paid. A spokeswoman from the Department of Education could not immediately provide details of Frishberg's consulting services.
Though the national financial aid inquiry has focused almost exclusively on private lenders, Kantrowitz said such arrangements between financial aid officials and the federal government could also pose a conflict of interest.
"The circumstances under which it would be inappropriate is if she did consulting directly for" the government's direct lending program, Kantrowitz said.
Currently, 20 percent to 25 percent of schools require their students to borrow Stafford loans directly from the government - among them Hopkins, he said. That number has been trending downward since the direct lending program's introduction during the Clinton administration - in part because private lenders are able to offer students slightly better deals, according to Kantrowitz.
Colleges such as Hopkins that participate in the federal direct lending program save the government money, Kantrowitz said.
Frishberg's consulting arrangement with the government was not a focus of Hopkins' investigation, said O'Shea.
"It's absurd to think that the federal government was engaging consultants for the purpose of persuading universities to adopt a direct lending program," O'Shea said.
March 22 New York Attorney General Andrew M. Cuomo says he will file suit against Education Finance Partners, a student loan company that he alleges has "kickback" arrangements with more than 60 colleges.
April 2 Cuomo announces an agreement with seven universities to reimburse students for revenue-sharing schemes between "preferred lenders" and colleges. Citibank and the schools agree to adopt Cuomo's "college code of conduct."
April 9 The Johns Hopkins University puts financial aid director Ellen Frishberg on paid leave after learning that she received about $65,000 in consulting fees and tuition from Student Loan Xpress, a preferred lender at the school.
April 11 The nation's largest student lender, Sallie Mae, agrees to adopt Cuomo's code of conduct and pay $2 million into an education fund established by the attorney general.
April 25 Hopkins adopts Cuomo's code of conduct and decides to stop recommending loan companies to students and parents.
May 3 Cuomo "opens new front" in aid scandal, targeting college alumni associations that recommend loans to former students.
May 9 The House of Representatives passes the Student Loan Sunshine Act, banning gifts and payments from lenders to college officials.
May 10 Student Loan Xpress' parent company, CIT Group Inc., agrees to pay $3 million into Cuomo's education fund and abide by his code of conduct.
Friday University of Texas at Austin financial aid director Lawrence Burt dismissed over undisclosed investments in Student Loan Xpress.
Yesterday Frishberg resigns.