Dartmouth College has been subpoenaed as part of New York State's investigation of the student loan industry. The subpoena, dated Feb. 14 and recently made public, was brought by New York Attorney General Andrew Cuomo and was brought about by the College's relationship with Bank of America.
The subpoena addresses the College's arrangement with Bank of America that allows the bank to offer "affinity" credit cards to Dartmouth students and alumni. These cards allow individuals to give back to their alma mater or to another charitable cause as they spend. Dartmouth is among over 80 colleges and universities, including Brown University, Princeton University and the University of Pennsylvania, that offer affinity cards to their students in conjunction with Bank of America, according to the bank's web site.
Dartmouth first began an affinity card arrangement in 2002.
The College appears to be one of several institutions that recently received a subpoena on affinity card agreements. The Dartmouth was not able to confirm why Cuomo specifically targeted Dartmouth for subpoena, as calls and e-mails to Cuomo's office were not returned by press time.
Cuomo has alleged that these card programs may represent a conflict of interest if they encourage colleges to promote the banks' lending programs. This type of agreement could cause colleges to press students to make financial decisions that are not to the students' benefit.
Robert Donin, Dartmouth's general counsel, said he had "no reason to believe [the subpoena] has anything to do with student loans."
"Dartmouth does not receive any financial consideration from any banks that issue student loans," he said.
Cuomo's investigations into student loan practices have garnered widespread national news coverage in recent months, following his settlement with Student Financial Services Inc., a loan consolidation company, and other colleges and universities, including the University of Pennsylvania. The investigations have led to settlements with 13 lenders and 25 institutions of higher learning, The Chronicle of Higher Education reported.
Many of the settlements centered on the institutions agreeing to a lending "Code of Conduct" with the banking institutions.
"Lenders are prohibited from giving anything of value to any college in exchange for any advantage sought by the lender," the code states.
The code also forbids lenders from paying colleges in order to get on schools' "preferred lender lists."
Throughout the investigations, Cuomo's office found that some school officials had received financial compensation from banks or loan agencies when students signed on for loans offered by the banks.
Dartmouth's financial aid office has required students to find their own student loans in order to avoid such "preferred lender lists" since May 2007.
Dartmouth, like other institutions targeted in the student loan probe, may decide to challenge New York's jurisdiction. In the past, Cuomo has argued that consumer protection laws allow him to pursue institutions outside of New York if their business involves New York residents, The Chronicle reported.
"Anytime we receive a subpoena or similar request we conduct a thorough review of the legal basis of the request before responding," Donin said.
Cuomo's investigation coincides with increasing federal scrutiny of financial practices in higher education. Dartmouth is one of 136 institutions that has received a letter from the U.S. Senate Finance Committee, which is currently examining how colleges and universities spend their endowments.
