New York State Senator Thomas P. Morahanannounced an agreement between the Senate Majority Leader, Assembly Speaker and Attorney General, resulting in the introduction of landmark legislation to protect students and their families from exploitation by conflicts of interest in the student-loan industry. The bill makes New York the first state to offer a solution to the student-loan scandal that has affected millions.
The Student Lending Accountability, Transparency and Enforcement (SLATE) Act of 2007, introduced by the legislative leaders at the request of Attorney General Cuomo, will address problems exposed as a result of the Attorney General’s ongoing investigation into the widespread conflicts of interest throughout the $85 billion-per-year student loan industry. The measure codifies Cuomo’s College Loan Code of Conduct, which is the basis for case settlements with the lenders and schools across the country.
"It important to ensure that college and university financial aid officers and lenders do not take advantage of working families and students seeking financial assistance in order to gain the education needed to compete in the 21st Century economy," said Senator Morahan.
Attorney General Cuomo said, "I am proud to stand with the leaders of the Legislature as New York leads the nation in passing the first state legislation to deal with the crisis of student loans. New York has a proud legacy of progressive legislative firsts and this act affirms that tradition. I also believe this will give students confidence in New York schools as they set a standard of lending integrity."
Senate Majority Leader Joseph L. Bruno said, "Recent disclosures of deceptive practices in the college loan industry are a serious problem affecting millions of college-bound students The legislation that we are introducing today will protect parents and students from financial exploitation, provide more transparency and accountability in the student loan industry, and give our families piece of mind in knowing that their hard-earned dollars are being used to provide a first-rate education for our children."
The Student Lending, Accountability, Transparency and Enforcement Act:
Prohibits lenders from making gifts – including the practice of revenue sharing – to colleges and universities or their employees in exchange for any advantage in loan activities
Bans colleges and universities from soliciting, accepting or receiving any gifts whatsoever – including those construed as part of a revenue sharing practice – from lenders in exchange for advantageous loan consideration
Bars college and university employees from receiving any advantage, reimbursement or benefit from serving as a member of a lender’s advisory board
Prohibits lender employees and agents from posing as college or university employees, including staffing the school’s financial aid offices with lender employees
Bans lenders and schools from agreeing to certain quid-pro-quo high-risk loans that prejudice other borrowers or potential borrowers
Prohibits schools from linking or directing potential borrowers to any electronic master promissory notes or other loan agreements that do not allow students to enter a lender code or name for any lender offering the relevant loan at that guarantee agency
Furthermore, the law dictates strict criteria that schools continuing to use "preferred lender" practices must abide by.