WASHINGTON -- In their most aggressive action yet in response to problems in the student loan industry, U.S. Department of Education officials said Monday that they have sent warning letters to more than 900 colleges and universities reminding them not to limit student choice in picking a lender.

The letter was sent to campuses where 80 percent or more of the federal student loan volume in 2006-2007 was handled by one lender.

Jeff Baker, policy liaison at the Education Department's federal student aid office, said a search of a student loan database showed that a vast majority of students at each of 921 campuses chose the same lender...

Baker said that campuses could face fines or be barred from participating in the federal lending program, known as FFELP, if they violate the department's student loan policies. That also includes a prohibition that bans college administrators from accepting gifts, payments or other perks in exchange for steering student borrowers to a particular company.

Some critics say the Education Department's involvement is overdue...

"This is a good step...but they should be far more aggressive in policing the relationships between lenders and colleges," said Michael Dannenberg, education policy director of the non-profit New America Foundation...

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