Nelnet, the nation’s second-largest student-loan consolidator, has agreed to stop paying alumni associations to recommend its consolidation loans, New York’s attorney general, Andrew M. Cuomo, announced today.

Under the terms of a settlement agreement with Mr. Cuomo, Nelnet will cancel its “affinity” agreements with 120 alumni associations and pay $2-million into a consumer-education fund established by Mr. Cuomo. Nelnet previously agreed to pay $1-million as part of a settlement with the Nebraska attorney general, but that agreement did not require the lender to end its referral arrangements.

In a statement, Mr. Cuomo said that “by paying for exclusive referrals of their loans, Nelnet violated the trust that students and recent graduates place in their schools and alumni associations.”

According to Nelnet, the terms of the affinity agreements varied depending on whether the alumni association was independent of or affiliated with the university. Independent alumni associations received payments for every loan consolidation they directed to the lender above a certain threshold, while affiliated associations received an annual fee only. In return, the alumni associations typically promoted the lender on their Web sites and allowed Nelnet to use their college’s logo for advertising purposes. —Kelly Field