Education Dept. Releases Regs on College Loans

The U.S. Department of Education yesterday released new and clarified regulations on student loans and grants that it says will “increase transparency” in the federal financial aid program to college students.

The loan program has been under fire due to revelations that some lenders have given schools payments, gifts and other inducements in return for special consideration by schools as they name preferred lenders to loan applicants.

The regulation bans lenders from offering gifts and payments to a school in return for being placed on a preferred lender list; and requires institutions that offer students a preferred lender list to include at least three lenders and explain why the lenders have been selected.

Details are available at: http://www.ed.gov/news/fedregister/finrule/index.html.

The regulation also prohibits certain relationships between lenders and educational institutions with examples of allowable activities and banned relationships.

Yesterday’s release also covers the mandatory assessment of defaulted Perkins Loans and provides relief for certain borrowers considered disabled.