Andrew Cuomo's Efforts - Cleaning Up The Student Loan Industry

The hard working Attorney General, Andrew Cuomo is back in the saddle, hacking away at the student loan lenders across the United States.  

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New York Attorney General Andrew Cuomo said Wednesday he is widening a probe of the student loan industry to target underwriting standards, prompting lawmakers at a U.S. Senate committee hearing to raise questions about possible discriminatory red-lining.

The $85 billion student loan industry is under scrutiny by Cuomo and Congress for alleged kickbacks and conflicts of interest involving lenders and college financial aid officers.

The U.S. House approved a bill to crack down on such practices last month, and the Senate is considering action.

Cuomo, who has already reached legal settlements with many colleges and lenders, told lawmakers he has begun looking at loan underwriting criteria used by lenders when deciding whether to offer loans to students, such as the university attended by the student, income and creditworthiness.

Cuomo said he is asking questions such as, "What are the civil rights ramifications of those factors?"

Ranking Committee Chairman Chris Dodd questioned industry officials at the hearing about "the redlining aspects of all of this." Red-lining refers to the home mortgage market practice in which lenders barred potential borrowers from getting loans based on the neighborhoods they lived in.

Dodd, one of 10 Democrats seeking his party's presidential nomination, asked officials, "Why would you brand someone" based on the college they were attending? He asked if "historically black colleges, for example," might be hurt by such a practice.

The Connecticut Democrat said any practices that would prevent the most needy students from getting loans would be "doing the direct opposite of what we're trying to do."

Cuomo urged Congress to legislate a crackdown on student loans, including the fast-growing private loan market.

"I urge Congress to enact stringent legislation to clean up all of the student loan industry," he said.

In recent months, Cuomo's office and congressional committees have alleged that student loan firms offered gifts and payments to college financial aid officers to curry favor with them and drum up business among student borrowers.

The House overwhelmingly passed a bill last month attacking student loan market misconduct. The measure would require colleges and lenders to abide by new codes of conduct, ban gifts from lenders to aid officers, require disclosure of college-lender links and protect students from aggressive marketing.

Dodd said he expects his committee will look at the private loan market, while Massachusetts Democratic Sen. Edward Kennedy's Education Committee looks at government-backed loan programs and issues related to the U.S. Department of Education.

"The practices we've heard about are going to stop, one way or another," Dodd said.

[Source CNNMoney.com]

Attorney General Andrew Cuomo – Doing His Thing