Financial Aid Regulation
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Related Resources
AAMC Documents
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Current Status
On August 14, 2008, President Bush signed the "Higher Education
Opportunity Act" (HEOA, P.L. 110-315), completing the first Higher
Education Act (HEA) reauthorization since 1998 [see
Higher Education Act Reauthorization]. P.L. 110-315 provides
for regulation and oversight of the financial aid community similar
to the "Student Loan Sunshine Act" (H.R. 890) passed by
the House on May 9, 2007. Among other provisions, the conference
agreement:
- Requires institutions to develop and administer a code of conduct
for their financial aid offices;
Requires institutions to disclose all relationships with lenders;
- Requires "preferred lender lists" to include at least
three unaffiliated lenders and the process that was used to develop
the list;
- Prohibits financial aid administrators who participate on lender
advisory boards from receiving compensation for such activities,
and requires such administrators to report lender support provided
for travel and related activities;
- Prohibits staffing of campus financial aid offices by lenders
or their employees, excluding services provided in exit and entrance
interviews for borrowers;
- Bans all gifts, opportunity pools, and revenue-sharing between
lenders and institutions, with the exception of favorable loan
benefits/terms, informational material, professional training
programs, and exit/entrance interview services by lenders (under
the direction of the institution's financial aid administrator);
and
- Requires certain lender disclosures in private education loan
applications, solicitations, and approvals.
Congressional Activity
On April 25, 2007, New York Attorney General Andrew Cuomo testified
before the House Committee on Education and Labor regarding his
investigation into alleged financial improprieties between the student
loan industry and financial aid administrators. In his testimony,
Attorney General Cuomo indicated that "Part of the reason the
practices we have uncovered have been able to flourish nationwide
over the past several years is because the U.S. Department of Education
has been asleep at the switch. The practices we have uncovered were
not undiscoverable until now. Rather, the entity charged with maintaining
the integrity of the student loan market failed."
These inquiries resulted in 10 student loan companies reaching
agreements to contribute a total of $11.7 million to the National
Education Fund established by Attorney General Cuomo. Several universities
also agreed to refund portions of student loans and adopt Attorney
General Cuomo's Code of Conduct. To date, no medical school financial
aid office has been found to have acted inappropriately. His investigation
also examined fradulant and illegal business practices of direct-to-student
loan marketing companies.
On May 10, 2007, Secretary of Education Margaret Spellings testified
before the House Committee on Education and Labor. In her testimony
she outlined work the Department had done to combat financial improprieties
including developing new regulations and convening a taskforce to
work on key lender issues. She also noted that the "department
oversees federal student loans. Private loans—which have lately
been the focus of so much attention—are overseen by other agencies
like the FTC, the FDIC, the SEC, and the Federal Reserve."
AAMC Activity
A March 14, 2008, AAMC comment letter regarding the conference
of H.R. 4137 and S.1642 notes that the AAMC supports full transparency
in medical schools' lender relationships. However, the AAMC "opposes
the House language that would prohibit financial aid administrators
from participating on lender advisory boards. The AAMC encouraged
the reimbursement of domestic travel and "reasonable expenses"
for these purposes and recommends adoption of the Senate language
to promote the valued guidance of the institutional financial aid
community with disclosure of their interactions."
In response to the increased attention to the relationships among
commercial lenders, educational institutions, and their financial
aid administrators, the AAMC Committee on Student Financial Assistance
(COSFA) developed a "Statement of Effective Interactions in
Financial Aid" to assist member medical schools as they consider
the creation and implementation of institutional guidelines in this
area of financial aid. The document was approved by the AAMC Council
of Deans on September 6, 2007, and is available on the Resources
for GSA Members: Financial Aid website.
Contacts
Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116
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