Reigning in the Wild West of the Student Loan World

The U.S. House of Representatives overwhelmingly passed the Student Loan Sunshine Act today by a vote of 414-3. The bill cracks down on relationships between lenders and colleges and sharply increases regulation of the student loan industry.

Among other things, the legislation bans all gifts from lenders to college officials, prohibits campus administrators from sitting on lender advisory boards, requires disclosure of college-lender relationships, and protects students from aggressive marketing practices. It also gives the U.S. Education Department authority to regulate certain aspects of the private loan market.

As Reuters reports:

"Investigations by Congress and New York Attorney General Andrew Cuomo have accused lending institutions of providing pay and perks to college financial aid officers in return for being put on 'preferred lender' lists shown to students looking to borrow money for their education.

Allegations have also emerged of questionable stock dealings involving lenders, financial aid officers and one employee of the U.S. Department of Education, which oversees the nation's complex student financial aid system."