NEW YORK - On the same day he bashed the federal government for not enforcing regulations regarding the student loan industry, New York Attorney General Andrew Cuomo applauded his own state's legislature for passing measures of its own.
The Slate (Student Lending Accountability, Transparency and Enforcement) Act is designed to protect college students who are prospective lendees from conflicts of interest in the student loan industry. It was passed by the state senate Wednesday.
"I applaud the state Senate's swift action today in passing the SLATE Act to protect college-bound students as they finance their education," Cuomo said Wednesday. "In particular, I want to thank Senate Majority Leader Joseph L. Bruno and Education Committee Chairman Kenneth P. LaValle for their leadership in helping root out conflicts of interest in the student-lending industry."
Earlier on Wednesday, Cuomo had criticized the Department of Education while testifying before the House Committee on Education and Labor.
"My investigation has shown that even where the DOE regulations did exist with respect to the (Federal Family Education Loan) program, there is significant evidence suggesting these regulations were flouted. For example, one school my office investigated had a preferred lender list of four FFELP lenders, without disclosing that one of the lenders had an agreement to purchase the loans placed by the other lenders on the list," Cuomo said. "The State University of New York had a college which required students to pick a particular FFELP lender as their Stafford lender. "
Cuomo has said that his investigation has revealed inappropriate relationships between lenders and schools. He alleged that Education Finance Partners, against whom he filed his first lawsuit and with whom he recently settled, was put on schools' "preferred lender" lists because it offered a cut of its profit to those schools. EFP has since settled those allegations.
He has settled with several schools and the four largest student lenders -- Sallie Mae, Citicorp, JP Morgan Chase and Bank of America.
The SLATE Act is greatly influenced by Cuomo's College Loan Code of Conduct, to which all settling parties have agreed. It prohibits lenders from making gifts or entering revenue-sharing agreements with colleges and universities, as well as banning schools from soliciting, accepting or receiving any gifts.
Also, school employees may not receive benefits from serving as a member of a lender's advisory board, and lender employees may not pose as school employees.
Finally, it bans lenders and schools from agreeing to certain quid-pro-quo high-risk loans that prejudice other borrowers or potential borrowers, and prohibits schools from linking or directing potential borrowers to any electronic master promissory notes or other loan agreements that do not allow students to enter a lender code or name for any lender offering the relevant loan at that guarantee agency.