New York Attorney General Andrew Cuomo is taking aim at non-federal student loan programs that he claims might be engaged in discriminatory practices. "There are civil rights and legal ramifications," Cuomo was quoted as saying in an article that appeared in The Wall Street Journal. Cuomo claims students attending Ivy League schools might be receiving different treatment for student loan opportunities than students at traditionally black schools.
Federally funded students loans are subjected to strict government oversight, but many families go beyond the federal loan programs to fund rising college costs with private loans.
Some lenders provide gifts and other inducements to colleges in exchange for recommending their loans. Senator Christopher Dodd (D-CN), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, has recommended that this practice be stopped. Several major universities have admitted to receiving kickbacks for steering students to certain banks. More than 20 colleges have pledged to agree to a code of conduct drawn up by Cuomo.
Cuomo has teamed with Senator Charles Schumer (D-NY), also a member of the Senate Banking Committee, to introduce federal legislation that would require complete and clear disclosure of student loan terms and fees on every loan application. "A disclosure law would help consumers understand what they are getting into and enable them to comparison shop, bringing down interest rates," said Schumer.
There are many features included in the proposed legislation. For example, colleges would be required to list at least three lenders on their preferred lender lists. Also, any lender that provided reduced interest rates or fee reductions to students at a college would be required to offer the same benefits to all students at the college, not just those who might be deemed to be better credit risks. In addition, lenders would be prohibited from limiting loan availability to students "based on race, age, and other personal factors, or the institution they attend."
Cuomo stated that the bill would "go a long way to taming the Wild West of the student loan industry."