By
Ruth Mantell, MarketWatch
Last Update: 7:49 PM ET Apr 23, 2007
WASHINGTON
(MarketWatch) -- The student-loan industry is under a cloud, hit by
allegations that some firms have been paying college financial-aid
personnel to steer business their way. The scandal is just the latest
twist in what has become an increasingly complex and frustrating
process for parents and students in their quest to find ways to fund
pricey college educations.
The growing concern over student lending has produced new regulatory
proposals aimed at reining in the increasingly sophisticated marketing
efforts used by private lenders. It has also sparked calls for parents
and students to be more vigilant in looking after their own interests
in the financial-aid process.
Companion bills have been introduced in the U.S. Senate and House that
aim to protect students and parents from exploitation by requiring more
disclosure from lenders about the deals they craft with colleges and
universities. The bills would encourage families to maximize their
borrowing through the government's loan programs.
"Lenders are increasingly using questionable methods to persuade
colleges to steer students to their loans," Sen. Edward Kennedy
D.-Mass., wrote in an e-mail response to questions. "In return, the
colleges give an unfair advantage to the lenders." A co-introducer of
the Student Loan Sunshine Act in the Senate, Kennedy says that too many
students don't exhaust their federal loan options, simply because they
don't know what funds are available or how to obtain them.