House Passes Student Loan Sunshine Act

The U.S. House of Representatives has passed a bipartisan bill designed to prevent conflicts of interest between postsecondary institutions and education-loan providers. The Student Loan Sunshine Act passed the House on a vote of 414 to 3.

The legislation incorporates components of a bill introduced by Rep. George Miller, D-Calif., who chairs the House Committee on Education and Labor, and separate legislation introduced by Rep. Howard “Buck” McKeon, R-Calif., ranking Republican member of the committee. The bill comes amid allegations that certain education lenders offered improper inducements to schools to win placement on preferred-lender lists.

“With this vote, the House has taken a huge step in the right direction to put a stop to those practices and make sure that the student-loan programs operate on the level, in the best interests of students and families trying to pay for college,” Miller said.

“Simply put, this bipartisan effort isn’t about us versus the lenders or us versus the institutions,” said McKeon. “It’s about protecting the interests of millions of young men and women who expect our student-aid system to be there for them when they need it.”
 
The bill requires postsecondary institutions to develop codes of conduct to eliminate even the appearance of conflicts of interest with lenders, places new restrictions on preferred-lender lists, bans gifts from lenders to school officials and requires greater disclosure of private education-loan terms. See a detailed list of the legislation’s requirements.

“USA Funds^® supports the concept of the legislation,” said Terry Muilenburg, USA Funds senior vice president, government and industry relations. “In fact, we have been working for the past several years with others in the student-loan and financial-aid communities to enhance ethical-practices guidelines to govern relationships between student-loan-service providers and schools.”

Muilenburg notes, however, that the specific interpretation of some of the bill’s provisions could be problematic and actually detrimental to efforts to better serve students and parents. For example, Muilenburg notes that the legislation, as written, puts in doubt USA Funds’ continued sponsorship of an annual symposium at which administrators of minority-serving postsecondary institutions have developed and shared strategies for enhancing student-retention and graduation rates and for curbing student-loan defaults. In addition, the new provisions will make it more difficult for loan-service providers to obtain valuable guidance from postsecondary institutions about improved services to students and parents, Muilenburg said.

No date has been set for action in the U.S. Senate, although similar legislation already has been introduced in that chamber.