UNR alumni group paid in endorsement of student loan firm

The University of Nevada, Reno Alumni Association has been cited as one of about 120 alumni associations nationwide found to have received money through an unethical arrangement with a prominent student loan consolidation company.

Over the past four years, UNR's alumni association received $88,400 from Nelnet Inc., the nation's second-largest student loan consolidation company, according to the New York Attorney General's Office.

In return, the alumni association gave Nelnet the names of UNR alumni, and Nelnet was given exclusive rights to use UNR's logo in its promotional material to those alumni.

The alumni association was given money for each alumnus who signed up for Nelnet's services.

The University of Nevada, Las Vegas Alumni Association was not involved in the case with Nelnet, according to the New York Attorney General's Office.

The techniques by Nelnet posed a clear conflict of interest and "violated the trust that students and recent graduates place in their schools and alumni associations," New York Attorney General Andrew Cuomo said in a press release.

Cuomo's investigations into the student loan business have led to the resignations and firings of financial aid administrators at several top universities amid allegations of personal kickbacks.

Nelnet has agreed to sever its ties to alumni associations and to pay $2 million toward a fund to educate students about their loan options.

The action will bring Nelnet into compliance with a new New York state law aimed at student loan companies.

Four years ago, UNR's alumni association received bids from other student loan consolidation companies that also offered to make payments in return for an endorsement, according to John Carothers, vice president for development and alumni relations for UNR.

The decision to endorse Nelnet was based on the company's benefits to alumni and its alumni association, he said.

He said he didn't see the situation as a conflict of interests because the alumni association wasn't leading alumni toward Nelnet's services.

Accepting money from Nelnet was seen as a licensing decision similar to letting credit card companies use UNR's logo, Carothers said.

But Nelnet's promotional material didn't disclose that the alumni association received money from Nelnet -- or that former students could receive better services with another company.

Credit cards disclose that the alumni association receives money, Carothers said.

He said he regretted the information wasn't disclosed in Nelnet's materials.

The alumni association has been cooperating with Cuomo's investigation, including turning over documents detailing Nelnet's payments to the association, he said.

It has severed its relationship with Nelnet and will not enter into any agreements with student loan consolidation companies, he said.