The federal Education Department, criticized for lax oversight of student loans, released proposed rules on Friday that would set new standards for universities and ban lenders’ marketing practices that have resulted, in some cases, in loan company payoffs to university officials.

The 225-page package of rules represents a change in direction by the department, which for years had ignored calls by its inspector general, Democratic lawmakers and even some loan-industry officials for it to be more aggressive in policing the $85 billion student loan industry.

The rules would for the first time require universities to include at least three loan companies on any list of lenders they recommend to students, and it would ban many of the gifts and payments to financial aid officials that lenders have been offering to win student loan volume.

“The secretary of education is amending these regulations to strengthen and improve the administration of the loan programs,” states the proposal, which the department said had been sent to the Federal Register for a 60-day comment period.

The education secretary, Margaret Spellings, created a task force in April to draw up the regulations after an effort to win consensus on a similar package of rules among representatives of students, lenders and academic institutions in a process known as “negotiated rule making” collapsed.

Over the past few months investigations in Congress and in the states, led by New York’s state Attorney General Andrew Cuomo, turned up an array of undisclosed relationships between universities and lenders, and conflicts of interest on the part of financial aid administrators. Some university officials who were promoting particular lenders had received stock on favorable terms, consulting payments or gifts from loan companies.

The proposed regulations would still only cover federally guaranteed loans.

They identify specific practices that would be barred, including “offering, directly or indirectly, any points, premiums, payments or other benefits to any school or other party to secure” student loan volume, in the federally guaranteed loan program.

Lenders who offer inducements run the risk of losing the federal guarantee on affected loans, under the proposal.

They would also ban a college’s “access to a lender’s other financial products, computer hardware, and payment of the cost of printing and distribution of college catalogs and other materials at less than market rate.”

The regulations appeared unlikely to meet much resistance.

The Consumer Bankers Association indicated that it would be unlikely to seek anything more than minimal changes, particularly since Congress is already moving to enact even tougher restrictions through legislation.

John Dean, special counsel to the Consumer Bankers Association, said lenders “have come to embrace the inevitability of reform and in many cases welcome it.”

And on Thursday, the trade group representing college financial aid officers agreed to bar its members from accepting most lender gifts and to stop allowing lenders to sponsor its conferences.

Democratic lawmakers in both the House and the Senate who have championed legislation on the student loan industry both offered cautious support but also criticized the Education Department for not acting more quickly.

Information from: www.chron.com

This entry was posted by Taman Siswa on Sunday, June 3, 2007 at 1:39 am and is filed under Student Loan. Tags: College, Education News, Financial Aid, 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.