U.S. state officials discuss student loan probe

By Joseph A. Giannone

NEW YORK (Reuters) - New York's investigation into student lending practices may gain broader, nationwide support as officials from 40 states joined in a conference call on Tuesday to address the widening scandal.

More than 100 representatives participated in a call hosted by the National Association of Attorney Generals (NAAG). The states agreed work together as New York's probe into conflicts of interest and deceptive practices in student lending expands to about 100 schools and some 20 lenders.

"The discussion focused on the importance of cooperation and the continuing need to coordinate as these investigations continue," said Angelita Plemmer, a spokeswoman for NAAG.

"I look forward to working with other states to clean up the student loan industry," New York Attorney General Andrew Cuomo said in a statement. "This is a widening national scandal and we need to address it as such."

New York's attorney general's office, which first announced his investigation into lenders and schools in February, said it has been working closely with Illinois, Missouri, California, Massachusetts and Rhode Island.

New York for the past six months has investigated financial arrangements between student lenders and about 100 colleges and universities. Cuomo said lenders offered payments, shares and a variety of perks to schools and school officials to secure a place on preferred lender lists and win more business.

Cuomo on Friday sent subpoenas and information requests to 13 more lenders, expanding the probe to include the top 20 student lenders which command 80 percent of the business.

In the past two weeks, Cuomo reached settlements with Citigroup, Sallie Mae and closely held Education Finance Partners. The state has collected $6.5 million in payments for a fund to educate students about financial aid.

The scandal has also attracted the attention of lawmakers. Cuomo's office and New York state's two top lawmakers on Monday unveiled legislation to regulate student loan practices.

Sen. Edward Kennedy of Massachusetts has introduced federal legislation to reform student loan practices.