A call to change student loans

Fri, May 11, 2007
The House moved to crack down on abusive student-loan practices, signaling displeasure with the Bush administration's stewardship of federal student aid. The bipartisan vote comes two days before Education Secretary Margaret Spellings faces a grilling on Capitol Hill, where lawmakers are focusing on relationships between lenders and student-aid officials that potentially leave families with worse deals on student loans.

The bill would place new restrictions on relationships between schools and lenders and require the secretary of education to more aggressively keep tabs on their dealings with each other.

The restrictions would stop short of banning schools from listing "preferred lenders" but would require them to defend their reasons for choosing the lenders they recommend. The legislation comes in the wake of an inquiry by New York Attorney General Andrew Cuomo that found widespread payments by lenders to schools and financial-aid officials who refer students to lenders.

Cuomo has blasted the Education Department for being "asleep at the switch" in overseeing the student loan industry.

The bill, sponsored by Rep. George Miller, D., Calif., chairman of the House Committee on Education and Labor, was approved in a 414-3 vote Thursday and is expected to reach the Senate as part of the Higher Education Act, which is up for renewal this summer. The bill would place reporting requirements on schools and student-loan firms, both of which would fill out disclosure forms to be submitted to the education secretary annually, and the information would be made available to students. The disclosures would detail everything from fees and repayment terms to whether the lender provides philanthropic donations to schools.

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