The U.S. Education Department, criticized for lax oversight of student loans, released proposed rules Friday that would set new standards for universities and ban lenders' marketing practices that have resulted, in some cases, in loan company payoffs to university officials, reported The New York Times.
The 225-page package represents a change in direction by the department, which for years had ignored calls by its inspector general, Democratic lawmakers and even some loan-industry officials for it to be more aggressive in policing the $85 billion student loan industry, reported The Times.
According to The Times, the rules would for the first time require universities to include at least three loan companies on any list of lenders they recommend to students and would ban many of the gifts and payments to financial aid officials that lenders have been offering to win student loan volume. The rules would bar everything from travel and entertainment expenses to providing staffing for college aid offices.
They would modify the existing framework, which applies only to federally guaranteed loans, "to strengthen and improve the administration of the loan programs,"Â the proposal states. The agency said the rules had been sent to the Federal Register for a 60-day comment period. If approved, they would take effect next summer, reported the paper.
According to The Times, Education Secretary Margaret Spellings created a task force in April to draw up the rules after an effort to win consensus on a similar package among representatives of students, lenders and academic institutions in a process known as "negotiated rule making"Â collapsed.- New York State Society of Certified Public Accountants
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