At a time of financial and emotional stress, college-bound students and their parents need to know that when they turn to a college's financial aid office, they are getting pure advice, unadulterated by anyone else's interests.
But as an investigation by New York Attorney General Andrew Cuomo made clear, the "preferred lender lists" offered by many colleges deprived applicants of that kind of cleanliness. The lists reflected the college's preference, but did not necessarily mean the lenders on them offered the best deals.
Indeed, those lists were sometimes populated by lenders who had provided favors to the colleges. Those favors were sometimes in the form of money, or "kickbacks" as Cuomo called them.
The practice did not, by itself, mean that every recommendation was inappropriate, but every one was tainted by that possibility, even if parents and students were unaware of the conflict of interest. That's why Cuomo did well to settle this matter quickly.
Citibank and five universities have agreed to pay $5.2 million to students and Cuomo's office, with some of the money funding a program to educate parents and students about loans. Just as important, they agreed to a code of conduct that will prohibit the signers from trading anything of value for any advantage. It will also require the universities to reveal how they select preferred lenders.
Cuomo has said he still intends to sue at least one company, Education Finance Partners, a San Francisco lending company.
Revelation of this shoddy practice was particularly shocking, given the nurturing relationship universities should have with their students and the honest one they should have with parents who are often paying the bills. College costs represent one of the biggest bills anyone has to pay over the course of a lifetime. Even among honorable lenders and universities, backroom financial deals corrupt those relationships.
Cuomo did well to pursue this matter and to quickly produce what appears to be a fair and useful outcome. We hope he pushes for more colleges and lending institutions to adopt the new code of conduct.