Seven student loan lending agencies agreed to a settlement with New York Attorney General Andrew Cuomo Tuesday, following an investigation by Cuomo's office into potentially deceptive lending practices. This is the latest group of lenders to settle in an inquiry that's been going on for nearly a year, after accusations first came to public attention last October.
The seven lenders were Nelnet Inc., Campus Door Inc., GMAC Bank, NextStudent Inc., Xanthus Financial Services Inc., EduCap Inc. and Graduate Loan Associates LLC. The lenders agreed to abide by a code of conduct drafted by Cuomo's office, and also jointly donated $1.4 million to a fund established to educate students about financial aid processes.
A number of lenders were being investigated for deceptive marketing practices that included sending out mailings that looked like they came from the federal government or a student's current lender, offering gifts such as iPods or gift cards to entice students to sign up for their loan, and advertising loan rates for which the majority of borrowers would not qualify. Lenders agreed to cease deceptive lending practices and to include a disclaimer in all loan offers that will encourage students to exhaust all other options for federal student financial aid before borrowing a private loan.