Bill to Outlaw University Ties to Loan Companies

The New York State Senate passed a bill Wednesday to forbid college financial aid advisers from accepting gifts and maintaining other financial ties with student loan companies.

Lawmakers collaborated with Attorney General Andrew Cuomo's office to design the bill, which came just a few weeks after Cuomo settled with universities throughout New York state for the millions of dollars lenders paid the colleges in exchange for loan business.

In the course of its investigation into these kickbacks, the office of the attorney general discovered the stocks held and sold by Columbia's Executive Director of Financial Aid David Charlow, who was suspended by the University shortly after the conflict of interest came to light. Charlow also sat on the advisory board of Student Loan XPress.

If the bill is passed by the New York State Assembly and signed into law by Governor Eliot Spitzer, it will forbid the giving and receiving of gifts between student loan companies and financial aid advisers, prohibit schools from hiring employees who also work for lenders, and bar college employees from receiving compensation for serving on the advisory board of a lender.

The bill would also require colleges to use firm criteria as they choose which companies get on the lists of lenders they encourage students to use.

Student Loan XPress appeared on Columbia's preferred lenders list at the time Charlow maintained ties with the company, but has been removed since his suspension.

The bill sailed through the state Senate's higher education committee after sponsors introduced it on April 16, and it then passed the majority Republican senate unanimously yesterday, with just two excused votes. Every senator co-sponsored the bill.

Travis Proulx, the press secretary for New York State Senator Liz Krueger, D-Upper East Side, said the bill passed unusually quickly through what is normally a slow and bureaucratic process.

He also said senators hoped to get it passed in time to catch the next round of students seeking loans, and they rushed to pass it by the end of the legislative session in a month.

The idea to regulate the student loan industry had been floating around the state Senate for a while, but Proulx said, "It wasn't until the attorney general's investigation that everyone came to the table."

Proulx said he was confident that the bill would pass the state assembly and that Spitzer would sign it.