3 Utah schools listed in lender probe

According to the Chronicle of Higher Education, the report could help Kennedy and others in Congress move forward with legislation that would better guard against such practices. Some colleges and universities involved in the scandal have already promised to accept new restrictions on their relationships with lenders, yet some are resisting, not wanting operations restricted.

In February, Kennedy introduced the Student Loan Sunshine Act in the Senate. The act intends to further define relationships between institutions and partnering lenders. It would prohibit lenders from providing any gift of more than $10 to any college employee, as well as keep them from entering agreements that would require the college to "brand" the lender's loan product.

"Focus and attention must be paid to America's students who need accurate, unbiased information when making one of the most important decisions of their lives," Kennedy said in a statement. He said the information discovered shows that inappropriate marketing practices are "found all too frequently" in the student loan industry.

Before investigation began on the marketing practices of lenders to students, such gift-giving, favors and expectation of compensation was seen as "normal," the Chronicle states, and it wasn't criticized by the U.S. Department of Education.

Key findings include that FFEL lenders spent large sums on travel and accommodations for meetings of advisory boards comprised of school officials and expected the benefits to yield increased loan volume at board members' schools. School officials were found to hold financial interest in participating lending institutions, including stock and options, as well as receiving consulting payments from FFEL lenders that are on the preferred lenders lists or are otherwise recommended to students. All of those are violations of the HEA.

The report is part of Kennedy's investigation into the student loan system. It is available, along with supporting documentation, at www.kennedy.senate.gov.

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E-mail: wleonard@desnews.com