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As student loan providers look back now on the nearly daily accusations of improper marketing to colleges and students that they endured in 2007, many of them grumble that for all the charges of questionable behavior, critics like New York Attorney General Andrew M. Cuomo failed to prove that any students were directly hurt by what they did.

The flurry of accusations has long since trailed off, and new federal laws (and others in states) are now in place to prohibit many of the practices that drew scrutiny before. Given that fact, reports of new allegations against a lender must exceed a high bar to be noteworthy.

But a report released Friday from Iowa's attorney general aggressively asserts that students and families were harmed by a series of marketing practices undertaken by the Iowa Student Loan Liquidity Corp., a nonprofit entity that is not a state agency but serves as the state's secondary market for student loans.

The report, which was requested and released by Iowa's governor, Chet Culver, concludes that the student loan organization acted inappropriately (and may have violated state laws) in the way it marketed its products to students and in how it paid colleges that it did business with.

“The key point, of course, is that ISL’s actions had negative consequences for Iowa students and their families," the report found. "While the consequences cannot be quantified, we conclude that many Iowa students who took out loans with ISL paid, or are paying, more than they would have paid if they had pursued other loans for which they were qualified.”

In a prepared statement Friday, Iowa’s student loan agency noted that most of the recommendations made by the state report had already been implemented. It also takes solace in the fact that "[t]he Attorney General’s report 'emphatically' dismissed any allegations or speculation that Iowa Student Loan had engaged in mismanagement, misappropriation of funds, or criminal conduct. It also concurred with a previous report from the State Auditor that found that Iowa Student Loan executive compensation was 'reasonable.'"

Still, the report is anything but supportive of the loan corporation's practices, especially given the "higher standard" to which it should be held because, as a nonprofit corporation, it has a charitable mission, and because it should be acting "in the public interest" given its close ties to the state. The report states, for instance, that the loan company's advertisements encouraging students to consolidate their loans “raise questions under Iowa’s Consumer Fraud laws."

Among the criticisms leveled against the loan corporation by the attorney general's report, which was based on an investigation conducted, pro bono, by Mark Kantrowitz of Finaid.org:

• It "fell short by not routinely including disclosures in its marketing materials … stating that federal loans ... were usually less costly than ISL’s private loans. Moreover, … ISL did not routinely encourage students and their parents to exhaust federal loan opportunities before applying for ISL’s private loans.”
• It "could have done more to assure that students exhausted available federal assistance before ISL extended a private loan to the student.”
• Its advertisements "had the tendency or capacity to mislead potential borrowers through claims that [its] consolidation loans would result in monetary savings to borrowers…. The advertisements could easily be read by a prospective borrower to mean that they would save money by consolidating loans when, in fact, the borrower would almost always spend much more to pay off the loans because the term was extended to 20 or even 30 years."
• The loan corporation made payments to "as many as 50 colleges" that were based on the number of students who borrowed from the loan corporation and "the staff time spent per borrower," though the attorney general notes that colleges were not required to substantiate what they charged. "In effect, ISL was paying a fee for every loan application it received," the report notes -- amounting to a total of $1.5 million over five years, until the loan agency stopped them in May 2007. These are precisely the sorts of payments that drew intense scrutiny from Cuomo and Congress.
• The Iowa corporation also paid bonuses to the college access centers it manages based on how many of the students they counseled borrowed from the loan corporation.

The loan corporation and the attorney general's office signed a memorandum of understanding in which the student loan entity agreed to abide by a series of changes in its policies, many of which it had already ceased and others that were barred by a new state law enacted in May.