HARRISBURG - The quasi-state agency that provides low-interest tuition loans and grants to Pennsylvania college students is paying more than $12 million to settle an IRS investigation into the proceeds from its tax-exempt bonds.

The Pennsylvania Higher Education Assistance Agency (PHEAA) made the disclosure Nov. 17 in a quarterly report and a filing with the federal Municipal Securities Rulemaking Board in what accountants and others say involves federal laws meant to prevent tax-exempt borrowers from profiting from bond proceeds.

PHEAA is the first student-loan agency to settle with the IRS in what is a wider scrutiny of the industry's practices, PHEAA spokesman Keith New said. The student-loan agency admitted no wrongdoing, New said.

The IRS investigation encompassed $205.3 million of PHEAA's outstanding tax-exempt bonds. - AP