Sallie Mae Makes Settlement in Probe

New York Attorney General Andrew Cuomo speaks during an interview in Colonie, N.Y., Tuesday, April 10, 2007. Cozy arrangements between colleges and the companies that loan their students billions of dollars are far more widespread than anticipated, Cuomo told The Associated Press Tuesday. (AP Photo/Mike Groll) (Mike Groll - AP)

Within the past week, six financial aid officers at various schools and a federal Department of Education official were placed on leave after Cuomo's office said they received stock, consulting fees or other compensation from Student Loan Xpress. The company was acquired by CIT Group Inc. in 2005 when it bought Education Lending Group Inc.

On Monday, CIT suspended the top three executives at Student Loan Xpress amid its own investigation into the unit's business practices.

Sen. Edward Kennedy, D-Mass., said Wednesday he has asked the Securities and Exchange Commission to open an investigation into the student loan scandal.

Kennedy, who chairs the Senate education committee, asked the SEC to look into the transfer of stock from the current president of Student Loan Express, Fabrizio Balestri, to loan officers at three schools and the official at the U.S. Department of Education.

In a letter sent to the SEC on Tuesday night, Kennedy said his own investigation revealed that Balestri apparently acquired the stock through a private placement of stock at a discount and then sold it to the others at a discount. The sale of private placement stock could be considered a securities violation, depending on when the sale took place.

An SEC spokesman declined to comment.

A spokesman for CIT Group did not return requests for comment on Kennedy's letter.

Luke Swarthout, of the U.S. Public Interest Research Group, said the settlement with Sallie Mae, while helping to shed light on problems in the student loan industry, was a "Band-Aid" approach to bringing more consumer choice and better rates to students.

"We really feel addressing the broader problems in the industry will require federal congressional action," he said.

___

Associated Press writer Mark Johnson in Albany contributed to this report.