A 2005 change to bankruptcy law puts private student loans on par with child support and alimony payments: Lenders can garnish wages if someone doesn't pay.

Cuomo's probe revealed what he calls an "appalling pattern of favoritism" for student lenders that provided kickbacks, revenue-sharing plans and trips to college administrators in exchange for recommended lender status. Other critics allege widespread corrupt arrangements propelled a student loan boom.

Lenders deny such charges, arguing that industry growth resulted from surging education costs and that higher interest rates are justified for unsecured loans to borrowers with blemished or insufficient credit records.

"Lenders take 100 percent of the repayment risk on flexible private-education loans made to people with limited credit histories, on which they will not get repaid for several years," Barry Goulding, a Sallie Mae official, told Congress last spring.

New regulations could dry up access to education financing, he and other industry executives argue. Some experts are skeptical, predicting waves of student loan delinquencies and defaults on what is outstanding.

"Should private student loans suffer the same sort of failure as (subprime) mortgages, as students graduate or drop out and find themselves unable to pay, we will do serious damage not only to the lives of many students but also to the economic and social fabric of our country that depends on college graduates for its strength," said Luke Swarthout at the U.S. Public Interest Research Group.

--Associated Press