The Johns Hopkins University has agreed to pay more than $1 million to settle a threatened lawsuit by New York Attorney General Andrew M. Cuomo, the latest in a string of victories for the crusading lawyer whose student-loan investigation has led to dismissals of top officials at Hopkins and other colleges nationally.
Hopkins has also agreed to five years of monitoring of its financial aid practices - the first such oversight arrangement Cuomo has struck with a school outside his state.
In announcing the agreement yesterday, Hopkins officials maintained that the school has not violated New York law but agreed to the settlement to "avoid lengthy, expensive litigation."
Cuomo, however, characterized problems in Hopkins' financial aid office as "one of the worst situations that we've come across in our months of nationwide investigation. And we've settled with 25 colleges and with the major lenders across the country."
Hopkins and Cuomo's office have been in discussions since April, when Cuomo disclosed that Ellen Frishberg, then director of student financial services at Hopkins, received from 2002 to 2006 about $65,000 in consulting fees from a student loan company her office was promoting to parents and students.
Frishberg resigned in May after an internal investigation determined that her undisclosed consulting work violated Hopkins' conflict-of-interest policies.
In an interview yesterday, Cuomo said Frishberg remains under investigation by his office for possible criminal charges.
Frishberg declined to comment yesterday, but previously she maintained that Hopkins encouraged her to supplement her salary with consulting work and that she never did anything unethical.
Hopkins officials have said there is no evidence that students or parents were harmed by Frishberg's action or that any other university officials were involved.
"The university has reached this agreement so that we can focus on what is truly important: ensuring that our financial aid program operates in the best interest of students," President William R. Brody said in a statement.
The Hopkins settlement mirrors one Cuomo reached late last month with Columbia University. Like Frishberg, a top financial aid officer at the New York Ivy League school was found to have received personal financial benefit from a student loan company recommended to students.
Since March, Cuomo has revealed revenue-sharing schemes between schools and lenders - arrangements he called "kickbacks" - at several prominent universities across the country. In some cases, universities received money from lenders they recommended to their students. In other cases, financial aid officers such as Frishberg were receiving payments or other financial benefits.
So far, the New York attorney general has pressured more than two dozen schools and five major lenders to adopt a "code of conduct" governing relationships between colleges and loan companies. At least four financial aid directors have been dismissed as a result of Cuomo's probe, his spokesman said. Settlements like those with Hopkins have netted nearly $12 million for his "national education fund," to be used to educate college students about the financial aid process.
In the wake of Cuomo's investigations, nearly a dozen attorneys general and high-ranking members of Congress have been calling for sweeping reform of the $85 billion student-loan industry. Legislation pending in Washington would cement many of Cuomo's recommendations - such as mandatory disclosure of arrangements between schools and preferred lenders - in federal statute.
Maryland Attorney General Douglas F. Gansler joined the cavalry of reformers this week when he called on representatives of Maryland's public and private colleges to adopt, within two weeks, a student-loan code of conduct that is similar to Cuomo's.
Gansler's office will decide what to do with half of the $1.125 million that Hopkins will pay under the settlement. But he is not a party to the agreement, and yesterday he distanced himself from his New York colleague's aggressive posture.
"While I have a different style and perhaps prefer a more cooperative approach to the resolution of this issue," Gansler said, "I think Attorney General Cuomo's desire to do this is certainly a laudable thing to do."
Under the settlement, half of Hopkins' payment will go to Cuomo's education fund. Gansler said yesterday that he intends to spend the "vast majority" of the other half on financial aid to needy Maryland students attending Hopkins.
"I'm happy to hear that half of the money will go to the Gansler initiative," said Tina Bjarekull, president of an association representing 18 of Maryland's private colleges, including Hopkins.
Bjarekull said there is concern among the state's higher education leaders at the prospect of an outside attorney general "imposing" conditions and "suggesting they somehow have jurisdiction over conduct in another state."
Cuomo has argued that he has legal standing to sue schools anywhere if New York students attend them.
To his critics in Maryland, Cuomo had this to say yesterday: "We can make this very simple. If you don't accept New York students, you don't have to worry about the New York attorney general. But if you accept New York students, then they have a right to protection. And when those rights are violated, the New York attorney general will be there."
As part of Cuomo's oversight of Hopkins, the university must centralize financial aid operations that are currently separated among different academic divisions, officials said. And it must submit annual reports to New York for five years documenting the school's adherence to Cuomo's code of conduct.
"Any violation of any provision in that code and they have a huge problem with us," warned Benjamin Lawsky, Cuomo's deputy counselor and special assistant.
Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, said he was surprised at the size and scope of the Hopkins settlement, but he said it was the inevitable cost of years of lax federal oversight of the lucrative student-loan industry.
"There is concern about the fact that an independent institution of higher education located outside the state of New York is now subject to the oversight of the New York attorney general," Nassirian said.
"Having said that, this is the price of sloppiness," he said. "For better than a decade, because of the feeding frenzy that was unleashed by the loan industry and complete lack of concern and oversight from anybody, institutions got co-opted. ... At some point you have to pay the price for it."