Ohio Attorney General Marc Dann joined attorneys general from 31 other states and the District of Columbia in urging the Senate to pass the Student Loan Sunshine Act.
The act calls for more transparency in the lending process as well as an end to the trend of private loan officers working closely with, or directly for, universities.
New York's Attorney General Andrew Cuomo, who started the recent trend of investigations into the student loan industry, wrote the letter, which was sent to four senators.
Dann's office has not yet released the results of its investigations into Ohio schools' relationships with lenders, and therefore would not comment on which elements of the act were most applicable to the state's schools. However, Leo Jennings, Dann's communications director, said the attorney general signed Cuomo's letter out of concern for the general situation.
We are deeply troubled by (where the loan industry is) in the state of Ohio and nationally
he said.
Mary Lou Nixon, a student support services adviser at Cleveland Scholarship Programs, Inc., works with students trying to navigate loan and scholarship opportunities. She said that before the problems were exposed, loan officers approached her to recommend their companies. Since Cuomo and Dann began their investigations, however, colleges and lenders have quieted down, she said.
What I find interesting is that I don't know (G?) specifically what impact this has had at the colleges because it's very quiet Nixon said. The colleges are laying low. The fact that they've listed anything (in preferred-lender lists) makes them very nervous.
At Ohio University, however, officials say they are not particularly worried about their preferred-lender list.
I think we're pretty solid said George Mauzy, a university spokesman.
The Student Loan Sunshine Act does mention preferred-lender lists and requires proof that the chosen lenders are actually in the students' best interests.
Dann is investigating alumni associations' relationships with preferred lenders at universities in Ohio, including OU's relationship with Nelnet. The university's Alumni Association promotes the National Education Loan Network to its members.
Mauzy said he has not heard updates about the investigation.
Financial Aid Director Soni Williams said her office has not heard back from Dann's office, but she added that she is optimistic.
Maybe no news is good news
she said.
During his investigation in New York, Cuomo also discovered that lenders were giving students different rates based on where they went to school. The companies often justify the practice by asserting that students from certain schools are more likely to be able to pay off their loans than graduates from other schools.
We have obtained definitive information that a significant number of lenders do in fact rate schools as a significant factor in their underwriting
Cuomo wrote to Sen. Chris Dodd in June. The school's credit rating can either exclude the student from any borrowing or mandate a higher or lower interest rate for any student attending that school. This 'cohort default rate' effectively judges the student by the past performance of other students at that school.
Cuomo cited Duke University and the University of Phoenix as examples.
In 2004, Duke had a 0.4 percent cohort default rate, according to the U.S. Department of Education. The University of Phoenix had a 7.5 percent default rate.
Cuomo's study found one loan company gave students with otherwise equal credit an 8 percent interest rate at Duke and 11 percent at the University of Phoenix.
OU's cohort default rate in 2004 was 3.2 percent.
Mauzy and Williams each said they had not heard of that type of rate classification being an issue, but Williams did express concern at the possibility.
At the national level, the House passed a bill July 11 that reduced federal subsidies to private student lenders, increased federal grants and halved interest rates on federal loans.
The bill has now moved to the Senate floor, where it is expected to be voted on soon.
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Emily Grannis
