NEW YORK - The nation's largest student loan provider on Wednesday settled with New York Attorney General Andrew Cuomo, who recently filed the first college loan lawsuit in a nationwide investigation into the industry.
Sallie Mae will adopt Cuomo's code of conduct governing student lending and contribute $2 million to a fund devoted to educating college-bound students about their loan options.
Also, Sallie Mae will discontinue call centers or other staffing for college financial aid offices, stop paying financial aid officers for appearing on advisory boards and stop paying for any trips or travel for any financial aid officer.
"Sallie Mae is the largest student lender in the United Sates. Their adoption of this code of conduct will affect millions of students and thousands of schools around the country, and will help set a new industry standard that all lenders should adopt," Cuomo said. "With Sallie Mae's $2 million contribution to an education fund, thousands of college-bound students will now have more information on how to wisely choose the best student loan for them."
Sallie Mae has almost 10 million borrowers and boasts a portfolio of more than $142 billion in loans nationwide.
"We are pleased that Attorney General Cuomo has recognized Sallie Mae's leadership in the student loan industry and our ethical market practices with students and schools," said Tim Fitzpatrick, chief executive officer at Sallie Mae.
"We are delighted to join the Attorney General as part of our ongoing efforts to educate consumers on financing college."
Cuomo said his investigation has uncovered many questionable conflicts of interest. His suit against Education Finance Partners, filed last month, alleges that EFP is put on "preferred lenders" list because it provides kickbacks to schools that do so.
Earlier this month, he settled with six universities and Citibank. Citibank, the nation's largest bank with student-loan business at about 3,000 schools, agreed to the same terms that Sallie Mae did.
New York, St. John's, Syracuse, Fordham, Pennsylvania and Long Island universities agreed to refund a total of $3.27 million to students.