Attorney General's News Release

June 19, 2007

Nixon, 31 other Attorneys General urge U.S. Senate to pass Student Loan Sunshine Act to curb loan abuses

Jefferson City, Mo. — Missouri Attorney General Jay Nixon and 31 other Attorneys General across the country today urged the United States Senate to quickly pass the Student Loan Sunshine Act to safeguard students and families nationwide from deceptive practices in the college loan industry. The U.S. House of Representatives passed the bill recently by an overwhelming 414-3 vote.

Investigations by Nixon, New York Attorney General Andrew Cuomo and other Attorneys General into abuses by the $85 billion college loan industry “have found a wide range of improper and illegal activities that serve as an impediment to the American dream of an affordable college education,” according to the letter sent today to Senate leaders.

In the letter sent to U.S. Senate Majority Leader Harry Reid; Senate Minority Leader Mitch McConnell; chairman of the Senate Education Committee, Edward M. Kennedy; and Sen. Michael B. Enzi, the ranking member of the committee, the Attorneys General said national legislation would serve as an important complement to work that the states have begun and address the problem with consistency for the nation. Starting this week, the Senate Education Committee will begin considering the Higher Education Amendments of 2007, during which the Sunshine Act is expected to be offered.

“With two-thirds of all college graduates leaving school with student loans, students and their families need to have access to objective and accurate information that will enable them to make choices that are most appropriate to fit their own situation,” Nixon said. “Unfortunately, we have seen examples in the last several months of institutions of higher education acting inappropriately in their relationships with lenders, including steering students to so-called 'preferred lenders.’ It’s time for action on a national level to help protect students around the country.”

The new federal law will require every school that participates in the Title IV program or has students obtaining private educational loans to adopt a Code of Conduct. Additionally, the law will:

• Restore trust in schools by banning gifts from lenders, participation in advisory boards of lenders, revenue sharing between schools and lenders, and staffing of school financial aid offices by lenders.
• Require that “Preferred Lender Lists” be created only with the student’s best interest in mind - a requirement that Nixon and other state Attorneys General have included in settlements with schools.
• Ensure access to the student’s lender of choice, whether or not the lender is on a Preferred Lender List.
• Guarantee oversight of lenders offering private loans, and require that schools disclose federal loan options before students take out private loans.
• Compel lenders and institutions to fully disclose terms, conditions and incentives (e.g., philanthropic contributions) for all loans.

In April, Nixon announced that his office had reached an agreement with Washington University in St. Louis that called for the university to abide by a code of conduct in its dealings with student lending institutions. Nixon said announcements about similar agreements between his office and additional Missouri institutions of higher education will be made in the near future.

In addition to Missouri, the Attorneys General who signed on to the letter represent Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Iowa, Illinois, Hawaii, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington, West Virginia and Wyoming.

Read letter from the 32 Attorneys General to the Senate leaders

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to the Press Secretary.

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