The Iowa Attorney General’s office is tightening up a state law designed to make sure students get the best deals on student loans. The law prevents lenders from giving gifts to colleges and universities in exchange for being added to a list of “preferred” lenders the schools give to students.
A new rule will make the law stronger by requiring lenders to report any gifts to colleges and universities, even if the contributions have nothing to do with student loans. Bill Brock, with the Attorney General’s consumer protection division, says there used to be problems in Iowa and even worse abuses elsewhere.
“We even had situations where lenders might be providing funds to employees in student aid offices so they could attend conferences and that sort of thing,” Brock says.
“It’s something that Congress dealt with by banning it.” Brock says the idea is to make sure students understand they should shop around for their loans and not just rely on that list.
“And that if a lender is on a preferred lender list, it’s there because of the terms of the loans it offers and not gifts that go to the school,” Brock says. The original Iowa law was created a few years ago after allegations surfaced about questionable practices at the Iowa Student Loan Liquidity Corporation.
The change is designed to make the law stronger by requiring lenders to report any gifts to colleges and universities, even if the contributions have nothing to do with student loans.