These days, getting accepted to college is the easy part.
New York State Deputy Attorney General for Regional Affairs Frank Hoare was joined by U.S. Rep. Maurice Hinchey as part of the Student Loan Education Initiative at a PTA legislative forum on Friday, April 4. Teachers and parents from Ulster and Dutchess counties convened at Cappuccino by Coppola’s in Poughkeepsie for an explanation of the “Student Bill of Rights,” New York State’s pioneering approach to guarding against deceptive and illegal practices on the parts of college lending institutions.
Nearly 60 percent of students attending college in New York require some form of loan assistance to fund their education, and increasingly, unwary scholars have found themselves in the clutches of predatory lenders, or making decisions without the best information they can get.
Hoare spoke about Attorney General Andrew Cuomo’s crusade to educate prospective secondary education students about the potential pitfalls of selecting student loans. Navigating the $85 billion student loan industry can be difficult for first-time borrowers, who sometimes suffer high interest rates and penalties from uninformed decisions.
One danger is borrowers’ exclusive reliance upon the “preferred lender list” presented by colleges’ financial aid offices. Hoare said that many parents and students treat the list like a mandatory course list. “They take this list and they say, ‘Wow, that’s great that this financial aid officer gave us this list of recommended lenders. This must be a good deal for me.’”
However, that may not always be the case. “What we discovered was that recommended list was not necessarily the best deal for your son or daughter. Many times, though, it was the best deal for the college or university,” said Hoare.
Through investigation, the AG’s Office found that colleges’ relationships with preferred lenders occasionally went deeper than disclosed. Some institutions had entered into revenue-sharing agreements with lenders, receiving a percentage of profits for each loan agreement inked. Sometimes lenders would “wine and dine” financial aid officers and college officials, offering them gifts and trips to “student loan conferences” in tropical locales in exchange for inclusion on preferred lender lists.
In light of their findings, Cuomo and company penned the College Loan Code of Conduct, later codified as the Student Bill of Rights. The eight-point Bill of Rights calls for unbiased loan advice from financial aid offices, the right to choose lenders outside of institutions’ preferred lists, and the right to correct interest rate information, among other protections.
These tenets were the basis for the Student Lending Accountability, Transparency and Enforcement (SLATE) Act of 2007, a bill unanimously passed by both houses of the New York State Legislature and signed into law by former Gov. Eliot Spitzer.
SLATE is now being endorsed as a national model by Congressional leaders, Hinchey among them. The Hurley Democrat said the state’s efforts to illuminate the lending process will bring uniformity to disclosure when enacted on the national level. The first step in this process was the adoption of the College Cost Reduction and Access Act last September.
“(This law requires) institutions and lenders to adopt strict codes of conduct and provide students with fair and full information about their borrowing options. In other words, students have to know, under this law, and they have to be made knowledgeable about all the options that are available to them so that they don’t get trapped into a higher-priced loan,” said Hinchey.
The legislation will be further supported by the Higher Education Act, which passed the House of Representatives on Feb. 7; approval is pending in the Senate.
For more information, visit the New York State Attorney General’s Office Web site at www.oag.state.ny.us.