The state Legislature last week quickly pushed through and unanimously passed legislation to prohibit revenue sharing agreements between colleges and student loan companies after Attorney General Andrew Cuomo began investigating these practices two months ago.

“New Yorkers will have the confidence in knowing that state law will be on their side when dealing with the college loan industry,” said Cuomo. “This is what we’re here to do and it feels good to do it.”

The Senate and Assembly passed The Student Lending, Accountability, Transparency and Enforcement, or SLATE, Act last week leaving it up to Gov. Eliot Spitzer to sign it into law. The bill would put an end to colleges referring students to select student loan companies in order to receive a cut of the profits from the lender in exchange for the referral. Cuomo announced he would put an end to such agreements when he launched an investigation calling these practices “deceptive” and “an unholy alliance.”

“We really set an example on how to get results. We came together and stayed together,” said Senate Majority Leader Joseph L. Bruno, R,C,I-Brunswick. “This legislation is a first-in-the-nation step to ensure that students and their families will not be exploited by fraudulent lending practices.”

In a short span of time Cuomo, in an effort to end revenue sharing, has managed to collaborate with the state Legislature to create legislation, make agreements with the top lenders in the country, convinced colleges to return some of the profits they made to students, banned with fellow attorneys general across the country to implement laws in their states and testified before the U.S. House of Representatives.

Last week the House passed the Student Loan Sunshine Act, which, like the SLATE Act, prohibits revenue sharing agreements between colleges and lenders, places gift bans on colleges, prohibits college employees from representing a loan company and bans “preferred lender” lists that are not in students’ best interest.

“Trust in our student aid system has been shaken; all of us can agree on a basic yet vital goal on this and that would be to restore trust; this effort will require all stakeholders in the system to step up,” said Rep. Buck McKeon, R-Calif.

Colleges were accused of creating a “preferred lender” list that “steered” students into believing that they had only one or two student loan options. The schools would refer as many students as possible and in return they would receive a cut of the interest earned off of the loan, according to Cuomo.

“We’ve come to a bi-partisan agreement, which is no easy trick. Shared revenue and preferred lender lists should be a convenience to students and families but has been corrupted to the convenience of colleges,” said Rep. George Miller, R-Calif.

The nation’s top lenders, Sallie Mae, Citibank, Bank of America, and JP Morgan Chase, have all agreed to stop revenue sharing and adhere to the rules of the SLATE Act.

The lenders also agreed to donate $2 million to $2.5 million to a fund created by Cuomo that will be used to educate high school students and their parents about student loan options. Numerous colleges across the country have agreed to return thousands and in some cases millions of dollars to the students who took out loans.

The $85 billion-a-year industry has taken hard hits recently as the attorney general investigates each lender and college, choosing which ones to go after on a case-by-case basis.

Cuomo has made individual agreements with each revenue sharing participant. In many cases Cuomo’s jurisdiction to hold other schools accountable is restricted, but with the assistance of other attorneys general, Cuomo’s SLATE Act may be implemented in several other states.

Attorneys General Jay Nixon of Missouri and Lisa Madigan of Illinois have successfully secured their own court orders against college loan providers, and colleges in their states are signing onto provisions similar to those found in the SLATE Act.

“Students and their parents often are presented with limited choices and information on lenders,” said Nixon. “We want to make certain our concerns about students being able to make informed decisions to get the best loan interest rates are fully addressed.”

Information from: www.legislativegazette.com

This entry was posted on Sunday, May 13th, 2007 at 11:14 pm and is filed under College Loans, Student Loan. Tags: College, Loans, Student, Student Loan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.