New Choice Requirement on Student Loans May Break Near-Monopoly Lenders Have at 55 Schools
Dervarics, Charles, Diverse Issues in Higher Education
Colleges and universities, including minor@-serving institutions, will have to include at least three different funding sources on any "preferred lender list" they give to prospective student borrowers, under rules being proposed by the U.S. Department of Education.
The department, late last month, briefed reporters on the changes, saying it will propose rules to carry out the new policy to improve accountability in a student loan system that has come under increased scrutiny. Preferred lender lists were among the prime targets during an investigation by New York state Attorney General Andrew Cuomo earlier this year. Cuomo and other critics claimed that the often short "preferred" lists denied choice to students and that some colleges may have acted unethically in compiling such lists.
Education Secretary Margaret Spellings said the department was moving "pro-actively" on the issue to ensure that students had a choice of lenders.
The department also announced it is seeking more information from 55 medium and large colleges and universities and nearly two-dozen lenders regarding loan practices that appear to flit in favor of specific companies.
Among the 55 colleges and universities in question, 48 had a single lender who provided 95 percent or more of the total student loan volume. …