McDonnell, 31 Other Attorneys General Call for Passage of Federal Student Loan Sunshine Act

Legislation Would Provide Greater Transparency in Student Loan Industry

June 19, 2007 -- Richmond- Virginia Attorney General Bob McDonnell today joined 31 other Attorneys General in calling for the quick Senate passage of the “Student Loan Sunshine Act.” The Act responds to increasing national scrutiny of the student loan industry, which has resulted in allegations of conflicts of interest and deceptive practices involving some institutions of higher learning and several lending institutions active in the student loan industry.

Speaking about the federal legislation Attorney General McDonnell remarked, “I have two children who have finished their undergraduate studies, another entering her sophomore year and two more who are fast approaching college age. I view this issue not only as the Attorney General, but as a father who, like so many other Virginia parents, relies on student loans to help my children pay for the education that is critical to their future.”

McDonnell continued noting, “Greater transparency can be brought to this important industry to help students and parents make informed choices. Virginia’s colleges and universities, parents, and students will all benefit from a student loan industry that is held to the highest of standards, and operates openly and with full disclosure. We know that Virginia’s institutions are aware of the concerns that have developed about student loan practices. We are certain they will evaluate their own practices to be sure that the best interests of their students are adequately protected. Passage of the Federal Student Loan Sunshine Act will serve these important goals.”

The Student Loan Sunshine Act passed the United States House of Representatives by a vote of 414-3. Among the highlights of the legislation, it will:

* Require institutions and lenders to adopt strict codes of conduct that adhere to specific guidelines.
* Ban all gifts, participation on advisory boards, and risk-sharing agreements between lenders and schools.
* Require institutions to disclose all relationships with lenders.
* Ensure that these requirements are upheld through strict enforcement of fines and compliance in annual audits.
* Conditions the use of “Preferred Lender Lists” on assurances that students’ best interests are protected by full disclosure.
* Ensure that students have access to all lenders of their choice, including those not on the “Preferred Lender Lists.”
* Ban staffing of school financial aid offices by lenders.
* Ensure that schools process all loans, from any lender, and do not steer students away from their first choice.
* Require lenders offering private loans to first inform students of their Federal borrowing options.
* Require that all financial aid exit counseling upon graduation or departure is provided with the school’s involvement and that students are informed of all of their repayment options.
* Ensure that lenders are up front about borrower benefits and follow all ‘Truth In Lending Act’ provisions.
* Instill enforceable marketing protections, including disclosures and notifications to students and institutions by lenders offering private loans.
* Require lenders and institutions to fully and prominently disclose the terms, conditions, and incentives for all loans.

Today’s letter was signed by Attorneys General from the following states: New York, Florida, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Iowa, Illinois, Hawaii, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington, West Virginia, and Wyoming. The District of Columbia also signed the letter.

Source: Virginia Attorney General

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