USC placed its financial aid director on paid leave Thursday as New York authorities continued to examine her business ties to a lender she recommended to students, part of a widening investigation sending ripples of shock through higher education circles.

In a brief statement, USC said it had launched its own inquiry of Catherine Thomas' relationship with Student Loan Xpress Inc., which had been placed on the university's list of preferred lenders.

New York state Atty. Gen. Andrew M. Cuomo's office said in a letter to USC on Wednesday that investigators were looking into whether Thomas, an associate dean, "engaged in deceptive practices or other illegal conduct" when she acquired 1,500 shares of stock in Student Loan Xpress' then-parent company, Education Lending Group...

Higher Ed Watch, part of the New America Foundation, disclosed Thursday that a U.S. Department of Education official owned about $100,000 worth of stock in Education Lending Group. The official, Matteo Fontana, oversees all lenders and guarantee agencies that participate in the Federal Family Education Loan Program...

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