State lawmakers are considering a new code of conduct for colleges and lenders handling student loans. Legislators started raising concerns last fall, fearing Iowa’s universities were working too closely with a private student loan agency and failing to encourage students to shop around for the lowest interest rates.
A bill pending in the Iowa House would prohibit Iowa colleges from accepting gifts from lenders. It would also require more public disclosure. Eric Tabor, the Iowa Attorney General’s chief of staff, calls it common sense reform. “It is basically consumer protection for students and their families to make sure they’re getting the best loans out there and that there (are) not inappropriate relationships between lenders and schools,” Tabor says.
Iowa lenders say the legislation may be too restrictive and it could result in fewer loans being offered to students. The bill would prohibit Iowa colleges from promising lenders a certain number of student borrowers. Steve McCullough, the C.E.O. of the Iowa Student Loan Liquidity Corporation, warns that kind of a deal is often struck to get lenders to take on higher-risk student loan applicants. “To do no harm is what we would really like and to make sure that students that would have otherwise have to drop out of school because they couldn’t get loans this fall are able to do so,” McCullough says.
According to McCullough, much of the bill is unnecessary because it mirrors federal legislation moving through congress. Representative Vicki Lensing, a Democrat for Iowa City, says that doesn’t mean the state shouldn’t move forward. “It’s a national concern and so we’re trying to not do anything in the state that would jeopardize what the feds are doing,” Lensing says. “On the other hand because of all the concerns we’re trying to make sure that our state laws will protect parents and families looking into student loans but also to make sure that they have the tools they need to get higher education.”
The bill faces an uncertain future as it hasn’t even cleared a committee in the House and it’s among a variety of issues lawmakers might jettison as they wrap up the 2008 legislative session in the next couple of weeks.