House Bans Student Loan Gifts to Schools

The House of Representatives voted overwhelmingly Wednesday to ban gifts and payments by student loan companies to universities, showing bipartisan resolve to clean up the $85 billion industry.

The vote, 414 to 3, demonstrated how politically potent the issue of paying for college has become at a time when tuition is steadily rising and millions of students depend on borrowing to finance college.

“With this vote,” said Representative George Miller, the California Democrat who leads the House education committee, “the House has taken a huge step in the right direction to put a stop to those practices and make sure that the student loan programs operate on the level, in the best interests of students and families trying to pay for college.”

The bill passed a day before Education Secretary Margaret Spellings was scheduled to testify before the House education committee about oversight of the industry.

It comes in the wake of revelations that lenders paid universities money contingent on student loan volume, gave gifts to the financial aid administrators whom students rely on to recommend lenders, and hired financial aid officials as paid consultants.

The nation’s four largest student lenders and at least 22 colleges have already signed on to a code of conduct developed by Attorney General Andrew M. Cuomo of New York.

Miller was joined by the ranking Republican on his committee, Representative Howard P. McKeon of California, in promoting the bill. “We’re stepping up today for a single, fundamental reason,” McKeon said before the vote, “to ensure our nation’s financial aid system continues to serve the needs of our students.”

But he also urged that Congress be careful “not to overreach.” The bill has bipartisan support in the Senate, said Senator Edward M. Kennedy, Democrat of Massachusetts and chairman of the education committee.

A senior Education Department official said that the agency was prepared to move quickly to draft regulations to enforce the bill.

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