Roundup: Week of July 30 - August 3

Ed Dept. Exercises Little Oversight in FFELP Market, Report Says

The Department of Education has failed to provide adequate oversight over the lenders that participate in the Federal Family Education Loan Program (FFELP), according to a report released Wednesday by the Government Accountability Office. The report found that "the department has not developed any oversight tools" to help it determine whether lenders have offered improper inducements to colleges and students to win student-loan business, and instead has responded haphazardly to individual comments and complaints. Moreover, the department failed to heed repeated requests since 1989 for clearer guidelines on acceptable lender behavior. The report recommends that the department update its oversight guidelines, start taking a more proactive approach in investigating lenders, provide better guidance to loan providers on prohibited inducements, and create a protocol for handling improprieties. Department officials told The Chronicle of Higher Education that they take "very seriously the departments oversight of schools and lenders." They noted that the agency has recently sent warning lenders to 921 schools in which one lender controls at least 80 percent of the loans the institutions' students have borrowed.

Private Loan Transparency Bill Breezes through Committee

The Senate Committee on Banking, Housing and Urban Affairs unanimously approved legislation Wednesday to increase transparency in the private student loan market. Introduced by Sen. Chris Dodd (D-CT), the committee chairman and Democratic Presidential candidate, the Private Student Loan Transparency and Improvement Act would, among other things, require lenders to provide clearer information about interest rates and fees they charge, and require them to inform potential applicants of the availability of cheaper federal loans. The legislation would also prohibit private loan providers from offering gifts to colleges in exchange for "preferential consideration" and would provide borrowers with a 30-day window to continue shopping for cheaper alternatives after being approved for a loan. "[W]e are another step closer to ensuring that students understand the products they are buying to help finance their education," Dodd said in a press release. The Senate is expected to vote on the legislation soon. A companion bill has not yet been introduced in the House of Representatives.

Cuomo Investigation Shifts to Athletics

New York Attorney General Andrew Cuomo announced Wednesday that he plans to investigate the athletic departments of 40 NCAA Division I universities that he believes may have accepted financial payments in exchange for directing athletes to a specific loan company and allowed that company to use university mascots and logos in its marketing. "Students trust their Universitys athletic departments because so much of campus life at Division I schools centers around supporting the home team," Cuomo said in a press release. "To betray this trust by promoting loans in exchange for money is a serious issue, especially when Division I schools already generate tremendous revenue from their student athletes." Cuomos interest in the athletic arrangements piqued after finding out that University Financial Services, a student lender, had arranged a deal with Division II Dowling College, where the company would provide $75 for every loan applicant sent by the college. The targeted schools include national powerhouses such as Georgetown University, the University of Kansas, the University of California at Los Angeles, and Rutgers University.

In addition, in a lengthy interview last week with Inside Higher Ed, Cuomo said that he was interested in looking at other potential conflicts of interest that universities have in their relationships with companies outside of the student-loan industry.