It almost seemed like a dare last month  when Nebraska Attorney General Jon Bruning said he had reached a settlement with the Lincoln-based lender, the National Education Loan Network. At a time when New York's attorney general, Andrew M. Cuomo, had been filing subpoenas and dishing out charges against lenders and colleges right and left, the settlement -- which the Nebraska official said resolved "very minor" mistakes by Nelnet and "closes the book" on Nelnet's potential legal problems -- seemed to say: "Back off, Mr. Cuomo, I've got my local lender covered."
Thursday, however, Cuomo opened what he called a "new front"  in his ever-expanding investigation into the student loan industry -- and this time, Nelnet was a central target, as were dozens of college and university alumni associations with which the Nebraska lender has formed partnerships. Cuomo announced that he was sending subpoenas to 90 alumni groups seeking information seeking "full disclosure" about arrangements in which Nelnet has paid them fees and, in some cases, a share of revenue in exchange for the right to market consolidated education loans to graduates of their institutions.
The investigation, Cuomo said, is exploring "whether alumni associations received and failed to disclose payments from Nelnet for steering their members exclusively to the student loan consolidator." The attorney general asked the alumni groups for documents related to:
- the criteria they used to select their consolidation partners;
- whether they compared Nelnet's rates to those of other loan consolidators;
- all benefits Nelnet gave to their employees
- all contracts with and payments from Nelnet
"Unfortunately it appears that student loan scams don't end at graduation, Cuomo said in the explosive language he has often used over the two months in which his student loan inquiry has held the spotlight. Today we have taken the next step in bringing justice to students and former students who have been victimized by the college loan industry. He added: "Our investigation seeks to put an end to kickback schemes and pay-offs that benefit lenders and their partners -- be they schools or alumni associations -- at the expense of students trying to control their debt."
Cuomo's news release specifically mentioned about 10 colleges and universities in New York State, including Iona, Juilllard and Le Moyne Colleges and several campuses in the State University of New York System, as well as several institutions outside the state, including Virginia's James Madison and Old Dominion Universities and the University of Illinois.
But Nelnet's Web site  contains links to about 120 "alumni partners" -- college and university alumni associations around the country that are part of the company's five-year-old "affinity marketing program," which Nelnet described in a 2004 newsletter. 
In a statement  released late Thursday in response to Cuomo's subpoena to the company, Nelnet described the attorney general's action as "very surprising to us," given the company's cooperation with Cuomo's office to date. "Throughout the New York Attorney General's inquiry process we have open regarding our relationships with alumni associations, and in fact specifically discussed this issue with his office several weeks ago."
The Nelnet news release contained an excerpt that appears on a page on its Web site  that describes the affinity program, which notes that in exchange for the right to use "certain intellectual property" of alumni groups, such as member lists and the groups' logos, "Nelnet typically pays the alumni association an annual fee, as well as, in some cases, a fixed fee for each loan consolidation application ready for guarantee that is received by Nelnet from a borrower on a member list."
Because (1) many of the alumni groups are independent of their institutions, (2) none of them play a role in their universities' selections of preferred lenders for current students, and the alumni associations are not involved in directly contacting prospective applicants, "Nelnet has concluded that these affinity and license agreements do not constitute prohibited remuneration and are permitted under federal law," the company said.
But the company's statement also suggested that its officials would make some changes in response to Cuomo's inquiry. "[T]o eliminate any potentially perceived conflict of interest, Nelnet will disclose to the individuals consolidating their loans any monetary arrangement that goes to the alumni association," it said. "In addition, Nelnet intends to work with alumni associations to eliminate any fixed fee that Nelnet pays for each consolidation loan application." The company said such a change would be consistent with the voluntary code of conduct it announced last month in its settlement with Bruning.
One alumni association that had appeared on Nelnet's list of alumni partners until recently ended its arrangement with Nelnet prematurely last month after questions were raised about the deal. The Star-Tribune  reported last month that the University of Minnesota Alumni Association had earned nearly $130,000 over three years in its deal with Nelnet, under which the lender paid it $100 for every consolidated loan.
Margaret Carlson, the association's chief executive, told the Minneapolis paper that the association had used the funds to keep the group's $40 membership fee from rising, and that many of her colleagues at other Big Ten universities "feel that this is a very good program." Carlson said. She said, however, that the association had decided to end the contract early "based on reputation and perception."
In a separate announcement Thursday,  Cuomo's office announced that Dowling College had agreed to sign the attorney general's code of conduct and end two relationships that had drawn the state's scrutiny. Under a "school-as-lender" relationship with Sallie Mae, the college had agreed to sell loans it had made to students to Sallie Mae and then recommend Sallie Mae exclusively to students who sought to consolidate their loans. And Dowling's athletics director had entered into an arrangement with University Financial Services under which the lender would pay $75 for every loan consolidated through the company, in exchange for letting the company use Dowling mascots and logos in its marketing of consolidated loans.