Last week the Senate education committee's incoming Chairman Sen. Edward Kennedy (D-MA) announced his priorities for the 110th Congress, including increasing the maximum Pell Grant to $5,100, capping loan payments at 15 percent of a borrower's income, cutting interest rates, and reforming the loan program to better serve students and create savings that will be redirected to student aid.
At a press conference held late last week to announce his priorities, Kennedy said he plans to introduce the Student Loan Sunshine Act, requiring higher education institutions to report to the Department of Education any financial or material benefits it receives from a lender.
Kennedy, a long-time critic of the FFEL program and outspoken proponent of the Direct Loan program, said that lender practices need to be examined closely and any actions that prevent students from receiving the best loan deal possible should be stopped.
"Going to college is hard enough students shouldn't have to worry about being exploited when they take out student loans," Kennedy said.
Specifically, the bill would require higher education institutions receiving federal funds to:
- annually report to the Department any benefits received from a lender, or agent of a lender, that originates loans at the institution
- publicly report annually the interest rates on all loans made to students through arrangements between the lender and the institution
- provide written evidence justifying why the institution believes an arrangement with a lender represents a highly-competitive rate for students
- ensure that this information is provided to students at the institution
These reporting requirements would apply to any arrangement an institution has with a lender to make FFELP loans and/or private loans.
In addition, the bill will require all lenders to report annually to the Department all gifts of more than $10 and any other financial or material benefits made to an institution.
Last week, The Chronicle of Higher Education quoted Larry Zaglaniczny, NASFAA's Director of Congressional Relations who said that NASFAA "'welcomed oversight in this area by Senator Kennedy and his committee.' But added, '99 percent of financial aid administrators are highly ethical and committed to doing their best to make an education affordable to their students.'"
Kennedy also expressed concern about the growth of private loans while announcing his planned legislation.
"We already know that the federal student loan program is filled with unnecessary subsidies for the big lenders," he said. "That's why I'm even more troubled when I hear of the aggressive marketing practices of some lenders who make private loans to students."
Kennedy is the latest Democrat to express concerns about the increasing reliance on private loans, suggesting that this could be another issue Democrats hope to address when they come to power in the 110th Congress.
By Haley Chitty
NASFAA Assistant Director for Communications
Posted November 21, 2006 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
Copyright 2006. Redistribution to non-NASFAA institutions is prohibited
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