Nelnet Discusses Its Malpractices, Plans To Correct Problems

Nelnet, a major student loan company, offered on Apr. 20 a broad accounting of many often unpublicized relationships it has established with universities and their senior officials, including managing telephone call centers, paying college officials for speaking engagements and giving plane tickets to financial aid officers.

The revelations came in a broad new disclosure statement the lender made in connection with an agreement to contribute $1 million to educate college borrowers and to abide by a code of conduct governing its relations with colleges.

Nelnet, based in Lincoln, Neb., with $23.8 billion in student loan assets, forged the agreement with the Nebraska attorney general, Jon Bruning. The company's president, Jeffrey Noordhoek, appeared with Mr. Bruning at a news conference on Apr. 20 to announce it.

The disclosures resulted from a review by Nelnet of its own practices in the student loan industry, begun earlier this year after Andrew M. Cuomo, New York's attorney general, announced that he was investigating the company, said Ben Kiser, a Nelnet spokesman.

In the news conference in Lincoln, Mr. Bruning characterized any wrongdoing by the company as minimal. "As we looked at the scale of mistakes that have been made in the student lending industry, Nelnet is at the bottom," he said.

But in New York, Mr. Cuomo said, "Our investigation of Nelnet is continuing."

The company announced an end to some of its practices, including a revenue sharing agreement with Western Illinois University under which Nelnet paid the university a percentage of all private college loans that its students took out with Nelnet.

Nelnet also said it had paid a fee, on one occasion, to a university chancellor for giving a speech to an advisory board the company had established. "Nelnet intends to end such payments," the statement said.

On another occasion, Nelnet bought Albany-to-New York plane tickets for two university financial aid officers so they could go to the theater. Mr. Kiser declined to identify the officials or their university affiliation.

Nelnet said it would in the future limit gifts to university employees to $10.

The company said it would continue to manage telephone call centers for the financial aid offices of seven educational institutions, but its call center operators would now "disclose to all callers that they are Nelnet employees when they answer the phone."

Previously, students seeking financial aid advice could have been left thinking they were speaking to a university official. Earlier this year, Mr. Cuomo wrote a code of conduct governing the relations among universities and lenders, banning revenue-sharing agreements on student loan volume and gifts to senior officials, and forbidding loan company employees from ever identifying themselves as college officials.

He has reached agreements with Citibank and Sallie Mae to abide by the code. Each has paid $2 million to a fund similar to the one to which Nelnet is contributing. Education Finance Partners, another student loan company that investigators found had paid at least 60 colleges and universities across the country for steering students to its loans, agreed to pay $2.5 million to Mr. Cuomo's fund.

Mr. Bruning announced yesterday that Nelnet would abide by a similar code of conduct, mostly written by Nelnet officials.

"I would say that we primarily wrote it, but worked with Bruning's office," said Mr. Kiser, the Nelnet spokesman.