Life Balance: Student Loan Regulation

Many students these days rely on student loans to go to college. With tuition increases nationwide, parents are finding it more and more difficult to fund their child's college education without assistance. But whom do you trust to make sure the loan is in your best interest? The Bush administration wants to regulate the relationship between universities and lenders

WASHINGTON (AP) -- The Bush administration has proposed new rules aimed at clamping down on conflicts of interest in the student loan industry.

Education Secretary Margaret Spellings had previously said she would issue the rules about this time and the department publicized the proposed rules Friday.

The action comes amid high-profile investigations into the student loan industry by New York Attorney General Andrew Cuomo and lawmakers in Congress. They have accused the Education Department of failing to police improper relationships between student lenders and colleges or their employees.

Cuomo's investigation unveiled arrangements between universities and lenders in which schools received some of the money lenders made from loans at those schools. And in some cases, the investigators found schools or loan officials were given incentives to place loan companies on a school's preferred-lender list.

The Education Department's proposed rules state that schools must have at least three companies on a preferred-lender list and must explain how they were selected.

The regulations are expected to be finalized in about a year. Congress may act more quickly.

The House recently passed legislation aimed at tackling the problem of too-cozy relations between universities or their employees and the loan industry. The Senate hasn't yet acted but is expected to in the near future.

Just because some universities have questionable relationships with lenders doesn't necessarily mean that you are getting a bad loan. It just means that they might be putting their best interest ahead of yours.

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