A probe into the US student loan industry has resulted in an out-of-court settlement with a major lender, but more questions of kickbacks and "conflicts of interest" are being probed, officials said.
New York state Attorney General Andrew Cuomo said Wednesday his office had brokered a settlement with Sallie Mae, America's largest student lender with a national loan portfolio of over 142 billion dollars, under which the lender agreed to improve its practices.
The loan giant, originally chartered by the government but now a private entity, voluntarily agreed to adopt a new code of conduct on student lending and will contribute two million dollars to a special fund that will help university-bound students find out more about loan options.
US banking titan Citigroup, which manages about 34 billion dollars in student loans, made a voluntary commitment last week regarding its practices and also offered two million dollars to the special fund.
Cuomo's office says the expanding investigation has discovered examples of "financial kickbacks" to universities related to the volume of loans they directed to a lender, as well as finding that some lenders picked up the tab for pricey trips by university officials to "exotic locations" including the Caribbean.
The New York state attorney general says some lenders also gave undisclosed gifts to university officials and that some colleges even allowed lenders to staff university phone banks.
The ongoing probe comes after financial lenders have been criticised by congressional lawmakers for aggressively marketing credit cards to students and Americans on low incomes, and amid fears of "predatory lending" in the mortgage market.
Sallie Mae said in a statement after the settlement that it "has co-operated with this inquiry since its inception, and, as the industry leader, we have been confident throughout that our policies and procedures would stand tall."
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