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Terry Goddard Launches Student Loan Investigation

(Phoenix, Ariz. – April 18, 2007) Attorney General Terry Goddard today announced that he is opening an investigation into possible violations of state law in the handling of student loans in Arizona.

The Attorney General’s Office will look into whether any Arizona schools have improperly chosen some lenders in preference to others and whether unlawful payments have been made to schools or individuals from the student lending institutions.

Goddard said he will issue civil investigative demands (CIDs) this week to at least two student loan businesses. The companies will be asked to produce records concerning their relationships with public and private universities, community colleges and other vocational schools in Arizona.

“We have seen evidence in other states that these loans have improperly benefited lenders and schools at the expense of students,” Goddard said. “If similar abuses have taken place in Arizona, we will take action to stop them and hold accountable anyone who has acted outside the law.”

A New York investigation has found that dozens of schools accepted financial incentives from the $85-billion-a-year student loan industry.

Goddard’s office participated in a conference call on Tuesday with 40 other states investigating this matter. During this call, the Attorneys General discussed strategies for investigating agreements in which lenders provided incentives to become a “preferred lender” at a college, even if the lender did not have the best rate or terms for students.