The good folks at Higher Ed Watch have found out that financial aid administrators at UT-Austin, Columbia, and the University of Southern California have financial interests in the same companies that they placed on their preferred lender lists.

Financial aid officers in all three schools sit on the advisory board of Student Loan Xpress, and owned stock in its parent companies. It seems stock options are given to board members, who can purchase them at discounted rates.

Columbia’s Executive Director of Financial Aid, David Charlow, has been put on paid leave while his case is reviewed. Charlow was the largest investor of the three. He earned more than $100,000 from the sale of Student Loan Xpress Stock. Columbia has also been subpoenaed, along with Student Loan Xpress, by New York Attorney General Andrew Coumo. The company gets almost 39% of the federal undergraduate loan volume at Columbia.

 The Daily Texan did a great job covering the story, with both a news story and editorial. While the situation is worrisome and improper, Student Loan Xpress accounts for only 4% of UT’s student loan volume, and its preferred lender list isn’t the great marketing tool it is at other schools. Interestingly, it did find that:

In its 2003 filing statement to the SEC, Student Loan Xpress described its focus as "to market to the financial aid offices of schools in order to be included on that school's preferred lender list." …

The company essentially reported to the SEC that it was formed as a marketing tool for these preferred lists - "to deliver student loans through the traditional school lender-list marketing channel."

These preferred lender lists have recently been the subject of much controversy; the “open secret” that the lists are often based on business deals between universities and lenders, rather than on the unbiased assessment of the best lenders for students, has been shattered by an investigation in New York, as well as scrutiny and legislation by Sen. Kennedy and Rep. Miller.