RECENT NEWS from the student loan industry has all the makings of a gritty detective flick. Some shady financial aid officials cut dubious deals with lenders at the expense of naive student victims.
The seen-it-all detective is Senator Edward Kennedy. He's the chairman of the Senate's committee on health, education, labor, and pensions, which has released a report on student loan abuses. It's a troubling account of what Kennedy calls "inappropriate marketing practices, conflicts of interest, and back-room deals."
The stories are similar. Students take out loans without asking a lot of questions because this is the only way they can go to college. Those who get what are called Direct Loans deal with the federal government. But students who go through Federal Family Education Loan programs are borrowing from private lenders.
This is where problems have festered. Some banks and colleges have had ill-advised, even unethical relationships. In some cases, colleges steer student borrowers by designating certain banks as "preferred lenders." The banks then reward college officials with services, consulting fees, or positions on boards.
Meanwhile, students can be railroaded because they don't know about all their borrowing choices. It's a national problem. Kennedy's report challenges practices at various lending institutions, including Citizens Bank, Chase, Citibank, Nelnet, and Northstar. Some colleges have fired their own financial aid officials, including Emerson College, which fired its dean of enrollment.
But cleaning up student borrowing will take a lot more than throwing out bad apples.
In a meeting at the Globe last week, US Education Secretary Margaret Spellings called for greater transparency in lending and a greater public role in financial aid, pointing out that many students go directly to banks for private loans to pay for college. She promoted President Bush's proposal to raise Pell grants over five years to $5,400 -- a move that's overdue, since grants don't add to the debt many students accrue by graduation.
Spellings also says colleges have to police themselves, making sure they have ethical and well-enforced financial aid policies.
On Wednesday, Kennedy's committee wisely approved a bill that would cut $18 billion in subsidies to student loan companies. Of this, $1 billion would be used to reduce the federal deficit. And $17 billion would be used for financial aid. Pell grants would go up to $5,400. The bill would cap monthly loan payments at 15 percent of borrowers' discretionary income. And the US Department of Education would have to name colleges that raise prices faster than their peers.
When it considers this bill, the full Senate should follow the committee's lead, cutting a fairer deal with college studentsLabels: academy awards, career training, career training.news, education online, financial aid, free college, free education, high school, student loans, study abroad |
