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Sat Jun 2, 2007
The federal Education Department released new rules for federal student loan programs today that would require universities to include at least three lenders on any list recommended to students and that would ban many of the incentives loan companies have been offering colleges and university officials to win student business.
The action represented a change in direction for the department which for years had failed to respond to 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 and defining what practices are banned.
Education Secretary Margaret Spellings created a task force in April to draw up the regulations after the collapse of an effort in the winter to win consensus on new rules among representatives of students, lenders and academic institutions in a process known as "negotiated rule making."
"The secretary is amending these regulations to strengthen and improve the administration of the loan programs," states the proposal which the department announced today.
The proposed regulations, which were sent to the federal register on Thursday, come on the heels of investigations in the states and in Congress, led by the New York State’s attorney general, Andrew M. Cuomo, that turned up an array of undisclosed relationships between universities and lenders as well as conflicts of interest on the part of financial aid officers. Some university officials who were promoting particular lenders had received stock on favorable terms, consulting payments or gifts from loan companies.
Just this week, the Education Department’s own inspector general reported to Congress that the department had made “minimal” progress in dealing with complaints about abuse in the nation’s system of government-backed student loans. An earlier report by the inspector general, in 2003, criticized the department for failing to provide any guidance on prohibited inducements since 1995.
Department officials have said repeatedly in the past that they did not have the authority to oversee many of these practices because they involved private loans that are not federally guaranteed and wanted financial-aid officers and the loan industry to police themselves.
The proposed regulations, which will be published in the federal register for a 60-day comment period, 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.
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.”
In addition, the rules would require that a university’s list of recommended or “preferred” lenders include at least three loan companies and exclude any lenders that provided inducements. Perhaps most importantly for students, the rules would require universities both to explain how and why they recommend specific lenders and to ensure that all students, not just a few, receive benefits offered by a lender on a preferred list.
The regulations are likely to meet little resistance. The Consumer Bankers Association indicated that it accepted the need for additional regulation. 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.
Source :
http://www.nytimes.com/2007/06/01/education/01cnd-educ.html?_r=1&hp&oref=slogin
YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.