(Updated 6/4/07) Recent investigations have exposed conflicts of interest between student loan companies and universities or their employees, raising questions about the integrity of the advice they give students about loans. College officials have received gifts, trips, stock options and other benefits from lenders, while some colleges have agreed to recommend certain lenders if those lenders share the proceeds. In other cases, lenders provide staffing or call centers for a campus, posing as college representatives while providing financial aid advice—including information about loans—to students.

Students and families should be able to count on their college financial aid office to provide impartial advice regarding loans and lenders. The proliferation of these arrangements has undermined both the real and perceived integrity of the financial aid process.

In response to these revelations, reforms have been proposed at the state, federal and institutional level. This document compares some of the leading proposals, analyzing their provisions relating to four aspects of the issue:

• Lender Conduct

• College Conduct

• Preferred Lender Lists

• Disclosure to Borrowers

A fifth section includes additional notes, including information about the enforcement mechanisms in each proposal. See the comparison, Student Loan Reforms: Preventing Conflicts of Interest.

The proposals included are:

New York State Law: “Student Lending, Accountability, Transparency and Enforcement Act,” A. 7590 and S. 5734 (formerly A. 7498 and S. 4524) passed the legislature on May 7, 2007. The legislation is based on the recommendations of New York State Attorney General Andrew M. Cuomo, and was signed into law on May 30, 2007.

U.S. House Bill Passed 5/9/07: “The Student Loan Sunshine Act,” H.R. 890. Originally introduced as a companion to Senate legislation on February 1, this is the amended version passed by the U.S. House of Representatives on May 9, 2007 by a vote of 414-3.

U.S. Senate Leadership proposal: “The Student Loan Sunshine Act,” S.486. Introduced in the U.S. Senate on February 1, 2007. Based on a bill introduced in the previous Congress.

U.S. Senate Republican proposal: “The Student Loan Accountability and Disclosure Reform Act,” S. 1262. Introduced in the U.S. Senate on May 2, 2007.

U.S. House Republican proposal: “The Financial Aid Accountability & Transparency Act,” H.R. 1994. Introduced in the U.S. House of Representatives on April 23, 2007.

U.S. Education Department Proposed Regulatory Changes: The Department of Education sent a notice of proposed rulemaking (NPRM) to the Federal Register on May 31, 2007. The proposed changes will be published, requesting public comment, in the Register, date TBD. Changes include the Department’s proposals for addressing conflicts of interest and preferred lender lists.

New York A.G. Code of Conduct: As part of settlement agreements, the New York State Attorney General’s office has convinced a number of colleges and lenders to adopt these codes of conduct.

Additional proposals made by the financial aid community and the student loan industry are listed here, but not included in our comparison document.

National Association of Student Financial Aid Administrators (NASFAA): The NASFAA Board of Directors adopted a "Code of Conduct for Institutional Financial Aid Administrators" on May 31st. Additionally, NASFAA reached agreement on an organizational code of conduct. Both sets of guidelines were developed in consultation with the New York Attorney General's Office.

The Consumer Banker's Association revised its "Educational Loan Customer Commitment" on May 30, 2007.