Did Congress tame the ‘Wild West’?

Opinions on the impact of New York Attorney General Andrew Cuomo’s investigation into the student loan industry (which reared its head again Tuesday — see related article) vary widely. Supporters champion it as having shined a light on sleazy practices in which some lenders and colleges engaged, and as ultimately helping students. Critics say it destroyed the careers of several financial aid officers and besmirched thousands of financial aid officers and lenders without ever proving that any individual student paid a penny more than he or she should have.

But what Cuomo’s investigation undeniably did was put significant pressure on the federal government to step up its regulation of the student loan industry. That was particularly true of the private or “alternative” loan market that had expanded widely — virtually unfettered by federal oversight — during the early part of this decade. While Democrats pummeled the Bush administration for its perceived lack of interest in regulating lenders who have long contributed heavily to Republican politicians, Education Secretary Margaret Spellings argued that federal officials, and especially her agency, had far less authority to rein in potential abuses in the private student loan market than they did in the federal loan programs.

The effort to change that equation — a major section of the Higher Education Opportunity Act that Congress passed in July and President Bush signed last month — is widely seen as giving federal regulators additional tools and consumers much more information with which to try to tame what Cuomo and members of Congress had dubbed the “Wild West” of the student loan market. Read full story. (Inside Higher Ed)

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