Enzi Introduces Bill that Would Eliminate School-as-Lender

Senator Mike Enzi (R-WY) introduced a bill on Wednesday that would place stricter regulations on colleges, student loan companies, and guaranty agencies in order to reduce potential conflicts of interest. The "Student Loan Accountability and Disclosure Reform Act" would establish a student loan code of conduct for colleges that would prohibit lender gifts of any value and revenue-sharing arrangements. Enzi’s bill would go farther than many of the other recent student loan bills in prohibiting preferred lender lists and prohibiting lenders and guarantee agencies from sending unsolicited mailings to potential borrowers. Further, the bill would phase out the "school as lender" program.

Miller Probes White House, Asks FTC to Investigate Deceptive Lending

Representative George Miller (D-CA) initiated two new inquiries related to the student loan scandals this week, requesting documents from the White House and the Department of Education and asking the Federal Trade Commission (FTC) to investigate deceptive lending practices. Miller is seeking all White House communications on student loans from the George W. Bush administration (including when Education Secretary Margaret Spellings was Bush’s domestic policy advisor) and any Department of Education communications related to the Bush administration’s oversight of the student loan industry. In addition, Miller wrote a letter to the chairwoman of the FTC that cited two examples of "unfair and deceptive" lending practices by College Debt Corporation and Education Loan Funding and requested that the FTC start its own inquiry.

2001 Lender Regulation Proposal Killed by the Bush Administration

A front page Washington Post article on Wednesday revealed that in 2001 the Bush administration killed a proposal to restrict lender payments and gifts drafted by Department of Education officials under the Clinton administration. The proposal would have clearly defined illegal lender inducements as a lender offering "something of value" to a college at which its loan volume was above 20% of the school’s total volume. In addition, the article reports that the Department of Education has been aware of improper lender behavior since 1999, and that industry executives have specifically asked the Department for guidelines on prohibited inducements.

Nelnet Staffs State Non-Profit Counseling Center

In addition to operating call centers at colleges, one student loan company helps staff a state non-profit college counseling center, according to the Chronicle of Higher Education. The College Planning Center of Rhode Island claims to offer free, independent advice on attending college. But the center’s employees work for a subsidiary of Nelnet and do not disclose their affiliation when answering questions on student loans. In fact, students who ask about loans are only given information about Nelnet loans (offered through the state’s student loan authority). Nelnet operates call centers at seven colleges, but had not yet disclosed its partnership with the counseling center in Rhode Island. Nelnet’s voluntary, self-made code of conduct agreement with the Nebraska Attorney General does not include ending its calling centers, in contrast to the code of conduct developed by New York Attorney General Andrew Cuomo.