By contributing $3 million to an education fund set up by the New York attorney general and adopting a "Lender Code of Conduct," CIT Group, owner of Student Loan Xpress, agreed to resolve the New York attorney general's investigation into its questionable lending practices.
"CIT is committed to best-in-class business practices and leadership in improving those practices," CIT said in a statement released today. It also said it supported efforts by Attorney General Andrew Cuomo and others to "improve transparency in the student lending industry." Such efforts, CIT said, "will ensure that parents and students are better informed as they consider their college loan needs."
Launched in November 2006, the probe into so-called "preferred lender" lists by the New York attorney general has since resulted in settlements with at least six colleges -- two of which are top-tiered schools -- and two major student lenders with none of the institutions admitting wrongdoing.
It has also resulted in the suspension of financial aid officials at an Ivy League and top university and expanded to include investigations by both Illinois' and Mississippi's attorneys general.
"Preferred lender" lists, according to Attorney General Cuomo, give the impression they include lenders that will give students the best rates when in fact the lists often are made up by lenders that offer the best "sweeteners" -- cash and other incentives -- to universities and their personnel.
In April, Student Loan Xpress replaced its entire top management after news broke the company had paid consulting fees and granted special stock options to college officials responsible for advising students of their loan options.
Sallie Mae and Citigroup are the other student lenders in the $85 billion industry to have recently arrived at similar settlements with Cuomo's office.
"This agreement serves as a linchpin in our continuing investigation of corruption in the student loan industry," Atorney General Cuomo said in a statement today. "The tide is turning in our investigation as more lenders and more schools change their practices. CIT's cooperation will add even more fuel to our ongoing investigation of certain lending officials who engaged in highly questionable practices."
Krista Kjellman contributed to this report.