The Iowa Student Loan Liquidity Corporation, a private nonprofit lender that dominates the student-loan industry in Iowa, has paid colleges about $1.5-million over the last five years for processing students’ applications for its loans, and critics say that money could influence financial-aid administrators to steer students to the organization’s loans, The Des Moines Register reported.

Iowa Student Loan says its practices are legal and differ from the kickback arrangements that have been criticized in investigations by the attorneys general of New York and other states because it pays no incentives but simply reimburses actual expenses that financial-aid offices have to document. One legislator, however, said he was “uncomfortable” with the practice. The lawmaker, Sen. Herman Quirmbach, said he would like to see colleges refund to students any money they received from the organization.

Iowa State University received nearly $500,000 in reimbursements from Iowa Student Loan from 2002 to 2006, but no longer takes the reimbursements. The University of Iowa and the University of Northern Iowa have never accepted the reimbursements, the newspaper reported. It noted that Iowa students have one of the highest debt loads in the nation and tend to take out more private loans before exhausting federal-loan options for students and parents than do their counterparts elsewhere. —Charles Huckabee