States Step up Student Loan Standards

[May 31, 2008.]

 

Across America, state attorneys general are heightening their scrutiny of the lending practices established by many colleges, regardless of the federal involvement. This is a practice that has been seeing widespread action throughout several other markets, and is now being focused on the industry for helping young adults get into advanced schools.

Last year, the attorneys general of several states, including Missouri and Illinois, have announced that as a result of inquiries into the lending procedures governing several major universities, these schools have agreed to adopt a much strong code of conduct to guide their relationship with businesses that provide loans for students.

Around the same time last year, New York State Attorney General Andrew Cuomo proposed a standard for lending practices that has been used as the basis for this stronger code. These standards come as a result of months of investigation and careful analysis of procedures and school conduct with lenders.

When students would go to their respective schools to find information regarding the best businesses to receive loans from, the schools would provide the names of companies that they have allied with in order to receive a kickback that comes in the form of loan expenses that are added to the cost of the loans available. This behavior in effect would mean that students would be paying more for their tuition than what is told to them upfront, which is regarded as being a terrible form of misconduct by the attorneys general.

Already after having been established, multiple schools have released their funds from the lenders and have either returned them to students or put them into programs to assist the students with their learning endeavors. Although the universities have denied any wrongdoing, they have agreed to abide by the code of conduct set forth and will continue to do so in the future.