Attorney General Cuomo Announces Federal Passage Of Landmark Student Loan Legislation Based On New York State's Code Of Conduct To Protect College Students
NEW YORK, NY (August 1, 2008) - Attorney General Andrew M. Cuomo today announced the federal passage of ground-breaking legislation to protect students and families who borrow to pay for college.
Late last night, the United States Congress passed the Higher Education Opportunity Act of 2008, a new law that addresses conflicts of interest and deceptive practices in the student loan industry. The Act codifies the Code of Conduct that Attorney General Cuomo developed after his nationwide investigation of the student loan industry exposed widespread conflicted relationships between schools and lenders. This new legislation prohibits these conflicted relationships and extends the Code’s protections to students and families across the United States.
“This historic legislation allows the rest of the nation to follow New York State’s lead in cracking down on the deceptive student loan industry,” said Attorney General Cuomo. “Last year my office’s investigation set the benchmark for reining in unscrupulous student lenders, who we discovered were all too intent to ensnare students in loan packages that left them drowning in unnecessarily high debt. Today's legislation will make it easier for millions of students to afford a college education.”
Attorney General Cuomo’s Code of Conduct prohibiting conflicts of interest between schools and lenders has been adopted by more than a dozen lenders, including the largest student loan providers in the country, and 26 schools. The Code served as the model for a law in New York State, the Student Loan Accountability, Transparency, and Enforcement (SLATE) Act of 2007, which passed the State legislature unanimously in May 2007. With today’s passage of the Higher Education Opportunity Act, the Attorney General’s Code of Conduct is about to become the law of the land nationwide.
The Higher Education Opportunity Act addresses widespread conflicts of interest in the student loan industry by requiring colleges and universities to develop a code of conduct with respect to federally guaranteed loans that:
- prohibits 'revenue sharing,' a practice where a lender provides a payment or other benefit to a school in exchange for the school’s promise to recommend that lender to students;
- prohibits financial aid officers from accepting any favors, meals, entertainment, or other gifts from a lender;
- prohibits financial aid officers from assigning first-time borrowers to particular lenders and from refusing to certify loans based on a borrower’s selection of a particular lender;
- prohibits the college and university from using a lender’s employees to staff the financial aid office or a financial aid call center.
The Act also includes requirements related to private loans, such as:
- prohibiting private lenders from offering gifts or other items of value to colleges or financial aid officers in exchange for advantages related to the lenders’ loan activities;
- prohibiting private lenders from charging prepayment or repayment penalties;
- prohibiting misleading ‘co-branded’ marketing, where a lender or marketer uses a school’s name, emblem, mascot, and/or logo to create the false impression that the school has endorsed the lender;
- requiring private loan providers to inform borrowers of the availability of federal aid and the interest rates available in connection with federal loans;
- requiring private loan providers to provide uniform, detailed, and timely disclosures to borrowers regarding the interest rate and other terms of offered loans, enabling borrowers to better understand the cost of their loan and to comparison shop for the best deals.
The legislation also includes important measures to rein in the cost of college through: