BANKING INDUSTRY OPPOSES BILL TO PROTECT WORKING FAMILIES FROM PREDATORY STUDENT LOANS
California Political Desk
April 09, 2008
SACRAMENTO, CA - Working families and their college-bound children would get the information they need to protect themselves from predatory student loans under a bill by Assembly Speaker pro Tempore Sally Lieber (D-San Jose) facing heavy banking industry opposition at 1:30 p.m. today in the Assembly Higher Education Committee.
A.B. 2876, the Student Loan Integrity Act, establishes minimum standards of ethical behavior for California lenders and student financial aid personnel and informs students of the benefits of federal student loans and the high risks of private bank loans.
"We need to ensure that colleges and universities make decisions about student financial aid in the best interests of their students. The reports that lenders have aggressively courted student aid personnel raise disturbing questions of conflict of interest," Lieber said.
"Equally importantly, we need to assure that students and their families are warned of the banks' abusive lending practices that can trap them into mounting debt that they may never be able to escape, even in bankruptcy," Lieber continued.
The bill prohibits public and independent college and university financial aid personnel --up to and including trustees -- from accepting anything of value from anyone doing student financial aid business with the institution. The ban would include travel, honoraria and consulting fees.
Student loans are a rapidly growing $85 billion a year industry fueled by the substantial higher economic returns associated with a college education, increased demand from students and their parents, grant and scholarship funds that have not kept pace with rising school tuition and fees, and heavy marketing by banks.
Last year, in response to student loan investigations by Congress and the Attorney General of New York and news reports of questionable activities, including in California, Speaker pro Tem Lieber asked the nonpartisan California Research Bureau to report on this issue. The report, entitled "Student Loans for Higher Education" describes federally subsidized and guaranteed loans, examines the private student loan industry, and discusses issues relating to student debt and financial counseling. The report also describes practices that have led to allegations and findings of fraud and abuse in the student loan system, and recent federal and state legislative and administrative responses. A.B. 2876 is based on the findings in the report. A copy of this report is available at www.library.ca.gov/crb/08/08-002.pdf.
A.B. 2876, the Student Loan Integrity Act, establishes minimum standards of ethical behavior for California lenders and student financial aid personnel and informs students of the benefits of federal student loans and the high risks of private bank loans.
"We need to ensure that colleges and universities make decisions about student financial aid in the best interests of their students. The reports that lenders have aggressively courted student aid personnel raise disturbing questions of conflict of interest," Lieber said.
"Equally importantly, we need to assure that students and their families are warned of the banks' abusive lending practices that can trap them into mounting debt that they may never be able to escape, even in bankruptcy," Lieber continued.
The bill prohibits public and independent college and university financial aid personnel --up to and including trustees -- from accepting anything of value from anyone doing student financial aid business with the institution. The ban would include travel, honoraria and consulting fees.
Student loans are a rapidly growing $85 billion a year industry fueled by the substantial higher economic returns associated with a college education, increased demand from students and their parents, grant and scholarship funds that have not kept pace with rising school tuition and fees, and heavy marketing by banks.
Last year, in response to student loan investigations by Congress and the Attorney General of New York and news reports of questionable activities, including in California, Speaker pro Tem Lieber asked the nonpartisan California Research Bureau to report on this issue. The report, entitled "Student Loans for Higher Education" describes federally subsidized and guaranteed loans, examines the private student loan industry, and discusses issues relating to student debt and financial counseling. The report also describes practices that have led to allegations and findings of fraud and abuse in the student loan system, and recent federal and state legislative and administrative responses. A.B. 2876 is based on the findings in the report. A copy of this report is available at www.library.ca.gov/crb/08/08-002.pdf.
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