STEVE INSKEEP, host:
The nation's largest provider of student loans, Sallie Mae, has agreed to a new code of conduct.
The idea is to prevent conflicts of interest between universities and those making the loans. This move is the latest response to revelations that some lenders rewarded schools for steering students toward those companies.
NPR's Larry Abramson has more.
LARRY ABRAMSON: New York Attorney General Andrew Cuomo announced that Sallie Mae has agreed to drop a long list of questionable behaviors that Cuomo's investigation has uncovered.
Attorney General ANDREW CUOMO (New York State): Down payments for what's called preferred lender status. Remember 90 percent of the students follow the school's recommendation as to who is a, quote, unquote, "preferred lender."
ABRAMSON: Sallie Mae does not admit it ever paid any money to schools for that listing, but it now promises it definitely won't in the future. Cuomo says the code of conduct also prohibits another practice, which Sallie Mae admits it did engage in providing workers to help staff call centers at universities.
Attorney General CUOMO: There had been instances where the lenders' employees actually man call centers at the school. So the student is calling the school and thinks they are speaking to a school employee, but in actuality, they're talking to an employee of the lending organization.
ABRAMSON: Cuomo also has found that many financial aid officers have served on boards of advisers for lenders and received travel expenses to resort locations. Spokesman Tom Joyce says Sallie Mae will no longer cover those costs but the advisory boards will continue.
Mr. TOM JOYCE (Spokesman, Sallie Mae): They will continue to provide us with the valuable feedback that we need to put the best products and best services in the marketplace.
ABRAMSON: Sallie Mae is also coughing up $2 million for an education fund that will help parents and students figure out the maze of loan offers. Citibank did the same last week. Sallie Mae insists the agreement is a validation of its existing ethics guidelines but the loan industry is clearly realizing it needs to clean the house or risk civil sanctions, perhaps even criminal penalties.
Cuomo is still investigating some of the most questionable behavior via officials at Student Loan Express, which allegedly paid large consulting fees to student loan officials. Senator Ted Kennedy has asked the Securities and Exchange Commission to jump into the probe. He wants the SEC to examine whether a Student Loan Express executive sold stock at a deep discount to four different financial aid officials.
Larry Abramson, NPR News.
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