WASHINGTON -- A developing scandal over ties between the student loan industry and financial aid officers is adding momentum to a congressional push to overhaul the college-loan system.
Members of Congress say new rules, being pushed by New York Attorney General Andrew Cuomo, on how loan companies deal with campuses should be applied nationwide.
"The case for major reform cannot be clearer. Our current student loan system is broken, and national reform is required," said Massachusetts Democrat Edward Kennedy, who leads the Senate education committee.
Kennedy and Representative George Miller, a California Democrat who heads the House education committee, are leading the push for congressional action.
Cuomo said his investigators uncovered numerous arrangements that benefited schools and lenders at the expense of students. For example, investigators say lenders have provided all-expense-paid trips for college financial aid officers who then steered students to the lenders.
Cuomo's office found that loan officers at a few schools had stock in a company that owned Student Loan Xpress, which was on the schools' preferred lender lists.
Miller yesterday called on the Education Department to temporarily ban colleges from using preferred lender lists.
Cuomo's investigation has elicited public outrage, making it all but certain that Congress will act, said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers.
Cuomo has agreements with industry leaders Sallie Mae and Citibank and some colleges in which the lenders and schools will adopt a code of conduct. Many in Washington, from both parties, see the code as a model.
The code bans lenders from paying colleges in exchange for being designated a preferred lender. It also bans lenders from paying for trips for college officials.