New York Attorney General Andrew Cuomo said that College Loan Corp., the seventh-largest U.S. student lender, would pay $500,000 as part of an agreement settling allegations that it offered perks to schools to win business.
The state said CLC offered various perks to school financial aid offices and their personnel. In exchange, the lender would win a coveted spot on the school's preferred lender list.
Among other favors, CLC sponsored advisory boards that provided meals, entertainment and travel for school personnel, the state said. CLC also provided personnel to work in financial aid offices during busy periods, printed materials at no charge and staffed financial aid call centers.
Cuomo said CLC had engaged in another, even more troubling practice: hosting financial counseling sessions on behalf of colleges for student borrowers.
"While these counseling sessions are required by federal law to provide lender-neutral information, respondent used these sessions as marketing opportunities," the state said in the agreement.
The company denied that its conduct violated the law.
San Diego-based CLC maintained that these additional services help families navigate the issues of financing a college education.
"We go the extra mile to provide families with the support and tools that empower them to make the best choices for their unique financial situation," according to an email statement attributed to CLC spokeswoman Tracy Neumann.
Closely held CLC agreed to reform its business practices, ending all financial relations with schools, and will pay $500,000 into a fund that will educate students about loans.
The company said it manages more than $10 billion in student loan assets.
CLC joins 10 student lenders who reached agreements with New York since Cuomo in February expanded an investigation into the $85 billion a year student loan business. The state has reached agreements with more than a dozen lenders and schools that have paid $11.7 million into Cuomo's education fund.