Released: May 29, 2007

No reform on private student loans

Source: Kathy Chu and Sandra Block, USA Today

For weeks, an investigation of the student loan business has been scrutinizing whether close ties between lenders and colleges have enriched them at the expense of debt-laden students.

New York Attorney General Andrew Cuomo, at the forefront of the probe, has urged an end to inappropriate loan practices and attacked “the vicious cycle of debt perpetuated by lenders and their university partners.” Proposed reforms, says Joseph Bruno, the New York Senate leader, would increase accountability and help spare students from “fraudulent lending practices.”

There’s just one problem: These efforts would do little to rein in the fastest-growing area of the market: loans that aren’t federally backed, whose rates can generally rise without limit. Bills in Congress wouldn’t affect rates on these loans, often called “private” loans.

And because Congress hasn’t raised the amount you can borrow on federal loans since 1992, more and more students have had to turn to higher-cost private loans. Many are stuck with mortgage-size debt for dec

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