Student Loan Controversy

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Letter to Members from NACUBO President

Dear NACUBO Colleague:

The relationships between our institutions and student lenders have been in the spotlight for several months.  Attorneys general in several states have been investigating these relationships with a focus on potential conflicts of interest and the public transparency regarding the details of arrangements between colleges, universities, and lenders.  Congress has expressed its concern by holding hearings, introducing legislation that would regulate college-lender relationships, and calling into question the regulatory effectiveness of the Department of Education.

Our primary concern about these developments is that, in the end, we resolve the underlying issues in a way that will optimize opportunity for students and families as they seek needed financial aid for education.  At the same time, we must assure ourselves and our stakeholders that our institutions adhere to high standards in student loan practices and student-lender relationships.

These issues will not be resolved quickly and, indeed, all indications are that the scope of inquiry into college and university relationships with financial institutions will broaden.  With that in mind, NACUBO will provide its members with resources that will help clarify the issues raised and keep track of developments.  We will provide, or link you to, resources that can assist you in evaluating your institution’s practices and in planning for future relationships under changing circumstances.

John D. Walda
President and Chief Executive Officer

 Upcoming Opportunities

• June 21   Join John Walda, attorney Stephanie Gold, and journalist Jeffrey Selingo, for a NACUBO webcast, Understanding the Student Loan Controversy .
• July 31  At the NACUBO annual meeting, participate in a special "town meeting" concurrent session to discuss how to adjust to a changing environment.

Understanding the Issues

• Background Information for Presidents and Chancellors on the Recent Controversy Involving Student Loans, American Council on Education  (April 16, 2007)
• Summary Chart:  New York Attorney General Student Loan Practices Code of Conduct and Proposed Federal Legislation and Regulations, American Council on Education  (April 16, 2007)
• Resources on Preferred Lender Program Investigations and Practices, National Association of College and University Attorneys (April 23, 2007)
• Student Loan Scandals, The Diane Rehm Show, NPR (May 2, 2007)   A one-hour broadcast with Luke Swarthout, USPIRG, John Dean, special counsel to Consumer Bankers Association, and Doug Lederman, InsideHigherEd.com
• National Association of Student Financial Aid Administrators (NASFAA)

From Capitol Hill

• Report on Marketing Practices in the Federal Family Education Loan Program  Senator Edward M. Kennedy (D-Mass.) (June 14, 2007)
• House Passes Student Loan Sunshine Act, NACUBO (May 16, 2007)
• Text of HR 890, Student Loan Sunshine Act, as passed by the House  (May 9, 2007)
• Unethical Student Lender Practices, House Committee on Education and Labor
• Accountability for the Department of Education's Oversight of Student Loans and the Reading First Program, hearing, House Committee on Education and Labor (May 10, 2007)

From the NY Attorney General's Office

• College Loan Code of Conduct
• Testimony at House Committee Hearing  (April 25, 2007)
• Settlement Agreements Signed  (April 2, 2007)

Current Regulations and Guidance from U.S. Department of Education

• Notice of Proposed Reguations, Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program, (June 12, 2007)
• Department of Education Proposes Changes to Loan Program Rules   [NACUBO's summary of the proposed rules] (June 12, 2007)
• GEN-07-01, Borrower of Choice of FFEL Lender, ED Dear Colleague Letter (March 30, 2007)
• FFEL Regulations:
  • 34 CFR 682.212  Prohibited Transactions
  • 34 CFR 682.401  Basic Program Agreement [for guaranty agencies, see (e) prohibited inducements]
  • 34 CFR 682.603  Certification by a Participating School in Connection with a Loan Application