Another lender settles in student-loan scandal

A San Francisco-based lender will pay $2.5 million to end an investigation into claims that it paid more than 60 schools to steer students to take out its loans, and an additional 13 lenders were hit with letters or subpoenas in a rapidly expanding probe, New York Atty. Gen. Andrew Cuomo said Monday.

Education Finance Partners, in addition to the largest loan-related settlement yet, also agreed to adopt Cuomo’s code of conduct as part of the student-loan investigation.

Education Finance Partners and 60 unnamed colleges and universities had entered into revenue-sharing agreements, Cuomo said. Such arrangements can reduce or eliminate competition, which may result in students paying higher interest rates. Cuomo said students have been reimbursed as much as $500 each under the settlements.

The lender’s $2.5-million payment will go to a fund devoted to educating college-bound students about their loan options.

The investigation, which involves more than 100 schools, has broadened to include companies that issue 80% of all student loans in the United States, according to Cuomo spokesman John Milgrim. Five subpoenas and eight letters seeking lending data were sent Friday.

The lenders that received subpoenas were College Loan Corp., Access Group, Sun Trust, Edfinancial and Regions Bank. The companies that received letters asking for documents were National City of West Palm Beach, Fla.; Citizens Bank, PNC of Pittsburgh, US Bank, Bank of America, Wells Fargo, JPMorgan Chase and Wachovia Corp.

Two major lenders, Sallie Mae and Citibank, have agreed to each pay $2 million into the fund set up by Cuomo’s office and change business practices being reviewed by Congress.