A college degree is something so many individuals strive to achieve. A college education is very rewarding, but it can also be very expensive. Many students who cannot afford to pay upfront will need to finance their education. Some students have turned to their college for lending advice, not realizing the college could be receiving kick-backs for referring students to certain student loan providers. It is unethical for colleges to be working in secret partnership with lenders, and possibly putting our young people further into debt. This practice needs to stop immediately.
The Assembly Higher Education Committee held a public hearing on the issue last month. Testimony was presented on the current practice of the student loan industry in New York State, methods to prevent conflict of interest between lenders and colleges, and ways to protect students. Based on this hearing, the Assembly has passed legislation that I supported to crack down on deceptive college loan practices. The bill – the first of its kind in the nation – was created after Attorney General Andrew Cuomo uncovered questionable relationships between some colleges and private lenders (A.7950).
The Assembly’s legislation- the Student Lending, Accountability, Transparency and Enforcement Act (SLATE) – is modeled after the Attorney General’s College Loan Code of Conduct, which is the basis for settlements with lenders and schools across the country. Specifically, the Student Lending, Accountability, Transparency and Enforcement Act:
- prohibits gift-giving from lenders to colleges and universities in exchange for any advantage in loan activities and bans colleges and universities from accepting such gifts as well;
- imposes a complete ban on gifts from lenders to college employees;
- bars college and university employees from receiving any compensation for serving on a lender’s advisory board;
- prohibits lender employees and agents from posing as college or university employees;
- bans lenders and schools from agreeing to certain quid-pro-quo, high-risk loans;
- provides for civil penalties of up to $50,000 for lending institutions and colleges and $7,500 for employees; and
- requires colleges to tell inquiring students about public loans – which may be a better option – before talking to them about private loans.
Students need to be given the best possible financial options when they are seeking to consolidate their loans. With the skyrocketing costs of college tuition, students and parents need fair play and straight information from universities and lenders. It’s time for scrutiny and accountability. The Assembly’s SLATE legislation will protect New York’s students as well as our higher-education system.