One of the nation's largest student loan consolidators has agreed to stop paying university alumni associations, including Hawai'i Pacific University's, to refer students to the lender.

In a settlement with the New York state attorney general's office announced yesterday, Nebraska-based Nelnet agreed to stop payments to university and college alumni associations in exchange for student referrals, which the company had been doing with HPU since November 2005.

Nelnet also agreed to pay $2 million into a fund to educate households about student loan options.

Yesterday's settlement is a part of a nationwide crackdown on what authorities consider to be deceptive and possibly illegal practices by some providers of student loans.

Nelnet had partnerships with about 120 college and university alumni associations. In HPU's case, Nelnet entered into a partnership — also called an affinity relationship — in which it paid HPU for referring recent graduates to its loan consolidations.

HPU yesterday said it did not have readily available figures on how much it was paid or how many students were referred to Nelnet.

"We call this a deceptive practice because the students think they are getting a good deal because the alumni association says so, when in fact it's the alumni association that is getting the good deal," said Jeffrey Lerner, A spokesman for the New York attorney general's office.

Margie Ulveling, HPU associate vice president for institutional advancement, said there was nothing deceptive about HPU's affinity relationship with Nelnet because HPU, on its Web site and in written materials, disclosed it was benefiting from referrals.

Ulveling also noted that HPU gave only alumni referral information about Nelnet's loan consolidations. "In our case, it wasn't students. At some universities it was," she said.

The student loan industry has recently become the subject of harsh scrutiny, including investigations by Congress and several state attorneys general.

A recent New York Times article reported a similar relationship between lender Citibank and Chaminade University of Honolulu. Citibank said the relationship did not increase its business and that the amount of loans actually had decreased, the Times reported.

"Chaminade University does not endorse any particular student lender, and at no time has it entered into a 'quid pro quo' arrangement with any student lender," said a written statement issued by the school.

The HPU Alumni Benefits Web site yesterday continued to list a referral to Nelnet's loan consolidation service.

It included the disclaimer: "Nelnet compensates HPU for providing links to Nelnet's Web site, for giving Nelnet names and addresses of recent HPU graduates, and for other cooperation in Nelnet's marketing of its consolidation loans to HPU alumni. HPU alumni do not have to borrow from Nelnet."

It also says HPU uses the compensation from Nelnet "exclusively to provide scholarship financial aid to HPU students."

Reach Loren Moreno at lmoreno@honoluluadvertiser.com.