Teaching the Student Loan Industry a Lesson (2/2)

In some cases, when students call a school for loan advice, they talk to a lending company employee. But they are not always told that. Andrew Cuomo wants financial aid offices and lenders to follow a set of rules, a College Loan Code of Conduct. These would end financial ties between lenders and schools, including gifts and trips.

At the same time, lawmakers are seeking changes in the student loan system. Mister Cuomo was at a hearing Wednesday in the House of Representatives. He criticized the Department of Education for not doing enough to control the student loan industry.

A day earlier, Education Secretary Margaret Spellings announced a committee to study federal student loan programs. And last week, her department temporarilyrestricted the use of a national system of financial records on millions of students. She said officials were concerned about an increase in usage of that government database by lenders and other companies.

In another development, Sallie Mae, officially the SLM Corporation, has agreed to a buyout offer. 2 banks and 2 private equity companies are offering shareholders 25 billion dollars. The deal is unusual. Loan companies generally do not produce enough profit to finance a sale based largely on borrowed money.