New York Attorney General Andrew Cuomo is widening his investigation of the US$85bn (£42.5bn)-a-year industry to examine loan criteria. He suspects lenders of setting more favourable terms at prestige institutions like Harvard versus students attending historically black institutions such as City University of New York and Long Island University. If this even looks remotely possible then the settlements which several loan companies have already made with the Attorney General’s Department will probably be small-beer to what they may end up paying to defend or settle class actions that could be brought against them by black students at these institutions.

The £12.6bn sale of Sallie Mae to the consortia of JC Flowers, Friedman, Fleischer & Lowe, JP Morgan Chase & Co and Bank of America was one of the most interesting private equity deals of 2007. However it will be interesting to see who will be paying for any costs and damages if Cuomo’s suspicions are confirmed. We predict that there will be plenty of litigants keen to try and recover some of the $225m paid to former Sallie Mae CEO Alfred Lord (who retired in 2004).

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