NAICU Washington Update

Student Loan Sunshine Bill Gets Nearly Unanimous Approval

May 15, 2007

By a vote of 414 to 3, the House has passed H.R. 890, the bipartisan "Student Loan Sunshine Act." H.R. 890 would "establish requirements for lenders and institutions of higher education in order to protect students and other borrowers receiving educational loans."

The bill includes a code of conduct for institutions that would apply to nearly every college and university in the country, whether or not they participate in a Title IV program, because the code applies to private educational loans as well as the federal loan program. The code extends to officers, trustees, and employees, as well as agents of the institution - such as alumni associations and booster clubs. The bill bans all but de minimus gifts to those same individuals. (There is some question as to whether this ban applies to the institution itself.) Those covered under the code of conduct also are prohibited from serving on an advisory board of a lender.

Institutions would not be able to enter into any educational loan arrangements with any lender in which the institution would receive any "material benefit." Institutions would be required to comply with the requirements of the bill before they could receive any federal funds or assistance.

The bill also requires reporting from all "covered institutions" - meaning all higher education institutions that participate in any federal program. Most of the reporting requirements apply only to institutions that use preferred lender lists, and require that very specific information be made available about loans from lenders on the list, as well as information on "any philanthropic contributions made by the lender[s] to the covered institution."

The bill was passed a day in advance of a hearing of the Education and Labor Committee. (See related article in this issue.) After negotiating details with Ranking Minority Member Howard "Buck" McKeon (R-Calif.), Education Chair George Miller (D-Calif.) quickly brought the bill to the House floor and was able to have it considered under the expedited "suspension of the rules" process, which does not allow for amendments.

House staff have assured NAICU that they are expecting to amend the bill in conference with the Senate, but it is unclear what items might be open to change. NAICU is particularly concerned about possible unintended consequences of the bill. These could include a lessened availability of capital, a negative impact on charitable giving, and implications for college and university trustees who also serve on bank boards or are employed by lenders who issue educational loans. Though it has had legislation pending in this area since last December, the Senate has not yet indicated any interest in passing legislation separately from the Higher Education Act reauthorization - which it hopes to push through this summer.

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