Pa. bill takes on college lending

In light of recent scandals in the world of college lending, a new piece of legislation… In light of recent scandals in the world of college lending, a new piece of legislation before the Pennsylvania House aims to better protect parents and college students from unscrupulous loan practices.

The legislation, introduced by Rep. John Yudichak, D-Nanticoke, comes on the heels of the ongoing investigation into unfair college lending practices led by New York State Attorney General Andrew M. Cuomo.

Cuomo’s investigation discovered that in exchange for revenue sharing and other perks, certain colleges give particular loan agencies preferential treatment when recommending lenders to college students. The investigation also revealed that in some instances, loan-agency personnel posed as college financial aid advisers during telephone calls with students.

“Many students are being pushed further into debt because there’s no guarantee that the companies being recommended to them for loans actually have the lowest rates,” Yudichak said.

“When I graduated from Penn State in 1993, only about one-fourth of my graduating class had taken out loans. Today, virtually every graduating class takes out considerable loans, incurring debt,” he said. “I want to make sure Pennsylvania does not create the largest group of [graduates with] college debt in history.”

Yudichak admits that although Pennsylvania financial aid and higher education institutions have an overall clean record, the many cases across the country where students and families have been taken advantage of are reason enough for this legislation.

In light of the several cases of improprieties by loan agencies, Yudichak’s legislation targets the relationship between lenders and financial aid offices at colleges. The legislation would eliminate loan-agency paybacks to colleges that create conflicts of interest.

The proposed legislation works toward two goals. The first is to create accountability in the financial aid system that ensures that parents and students get an opportunity to choose from competitive and quality agencies. Secondly, the legislation attempts to set up a system that allows parents and students to have access to the correct information while navigating the financial aspects of higher education.

Currently, Yudichak and his team are working with parents, students, colleges and loan agencies in Pennsylvania to create a draft of the legislation to be released as students return to class for the fall semester.

Yudichak said he hopes the bill will be finalized by September and moved to the Governor’s desk before the end of the year.

“Since the federal government has not yet seen it fit to act, it’s up to Pennsylvania to make sure its students get the best loans at the lowest rate. We have to protect our colleges and students,” he said.