Legal Scrutiny For University Ties to Loan Lenders

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According to this NYT article, there is:

… a sharpening focus by government officials on the often undisclosed relationships between loan companies and colleges and universities, particularly as tuition has soared and private student loans have become a lucrative, fast-growing business.

Senator Edward M. Kennedy, Democrat of Massachusetts and chairman of the Senate education committee, is taking aim at so-called preferred-lender lists, which college financial aid offices compile to recommend loan companies to students. Because students tend to rely on advice from those offices, getting on the list is crucial, and lenders use various tactics to curry favor with colleges and universities.

Mr. Kennedy is pushing a bill that would require the disclosure of such arrangements; ban gifts and services worth more than $10 to college employees; and require lenders to tell students that they might be eligible for low-interest federal loans.

The federal Education Department, which until recently paid relatively little attention to such practices, is now weighing whether to regulate preferred-lender lists, perhaps by requiring colleges and universities to include a certain minimum number of loan companies as options; some institutions have just one or two on their lists. …

Given how much money many law students have to borrow, it would be nice to see more disclosure and transparency here.

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