CHAIRMAN KENNEDY RELEASES SECOND REPORT ON LENDER ETHICS Report details abuses within lending system
WASHINGTON, D.C.—Today, Senator Edward M. Kennedy, Chairman of the United StatesSenate Health, Education, Labor and Pensions (HELP) Committee, released a report on thestudent loan system entitled “Second Report on Marketing Practices in the Federal FamilyEducation Loan Program.” The report discusses the findings of Chairman Kennedy'sinvestigation of inappropriate marketing practices in the student loan industry.
Chairman Kennedy said, “The findings of the report underscore the urgent need for reform ofthe student loan system. How to pay for college is one of the most important decisions thatfamilies can make. We owe it to them to make sure they’re getting the best deal possible fortheir hard-earned education dollars.”
The report is posted on Senator Kennedy’s website at www.kennedy.senate.govKey findings are included below.
• Some lenders provided donations, services, private loan funds, and other benefits tocolleges in exchange for preferential treatment with regard to student loans, includingplacement on the college’s preferred lender list;• Some lenders made improper payments to schools, based on loan volume, and gainedpreferential treatment for FFEL loans in exchange for such payments;• Two lenders entered into an improper agreement with a guaranty agency under which(1) the lenders paid the guaranty agency a marketing fee which violated theinducements prohibition and (2) the guaranty agency provided free personnel toschools in exchange for FFEL market share;• Some lenders, schools and alumni associations entered into agreements thatimproperly constrained financial aid officers from providing unbiased and neutralfinancial advice to students.The United States Senate higher education bill would prohibit all of these practices.-30-
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