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8 student loan companies are in N.Y. settlement talks

September 06, 2008|From the Associated Press

NEW YORK — The attorney general of New York is negotiating settlements with eight student loan companies to reform deceptive practices in the industry. A particular focus is the marketing of products so they appear to be federal loans, an official said Friday.

"Some of the seals [used by lenders] looked very similar to those of the federal government," said Alex Detrick, a spokesman for the attorney general's office.

The distinction is important because federal loans have fixed interest rates that are often lower than private loans.

The student loan companies also misled consumers at times about the best loan options on the market, Detrick said.

This group of direct-to- student lenders sends advertising material by mail or online. Students are sometimes offered gifts to sign up, he said.

The attorney general's office is also preparing to sue student lender Goal Financial of San Diego for deceptive practices, Detrick said.

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