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 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; they would also ban many of the gifts and payments to financial aid officials that lenders have been offering to win student loan volume.

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 state Attorney General Andrew Cuomo, turned up an array of undisclosed relationships between universities and lenders, as well as 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 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 offered inducements would run the risk of losing the federal guarantee on affected loans.

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

“It has taken far too long for the Department of Education to act,” Cuomo said in a statement. He noted that the proposed rules would not require preferred lenders to be selected solely on the basis of the best interests of student borrowers. “This seems to be a gaping hole in the regulations,” Cuomo said.

Information from: www.sfgate.com

This entry was posted by Taman Siswa on Sunday, June 3, 2007 at 1:35 am and is filed under College Loans, Student Loan. Tags: 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.