November 3, 2007
Dept of Ed announces new rules for student loan lenders
Yesterday the Department of Education announced new rules for lenders in the FFELP programs. Read the excerpt from the Washignton Post below:
By Maria Glod
U.S. Education Secretary Margaret Spellings announced yesterday an overhaul of rules governing the student loan industry, including measures prohibiting lenders from offering schools gifts in exchange for business and a mandate that each university include at least three companies on its preferred lender list.
The new regulations, which will be released today and go into effect in July, were crafted in response to criticism that the department has not provided adequate oversight of the $85 billion-a-year industry. Federal education officials also said the department has sent letters to 921 colleges and universities nationwide seeking details on their relationships with lenders. The letters, mailed in July, were sent to institutions at which more than 80 percent of loans are handled by a single lender. A second set of letters was sent to 55 schools and 23 lenders in October.
“Obviously we are continuing to work on oversight and monitoring issues,” Spellings said in a conference call with reporters. In recent months, federal and state investigations have found conflicts of interest among lenders, universities and government regulators. As a result of New York Attorney General Andrew M. Cuomo’s far-reaching investigation of the industry, a dozen lenders have agreed to pay $13.7 million to the National Education Fund, which helps families navigate the loan process.
Congressional leaders and activists pushing for changes said that the rules announced by Spellings yesterday are a good step but that more needs to be done.
“The new regulations are largely consistent with the reforms the Senate passed earlier this year, and
should help curtail inappropriate relationships between college and lenders that make federal student
loans. But there’s more to be done — lenders who offer private student loans should also be covered by
these rules,” Sen. Edward M. Kennedy (D-Mass.) said in a statement.