Education Department Issues Rules to Address "Conflicts of Interest"; Congress Works to Reauthorize the Higher Education Act
November 7, 2007
On November 1, 2007, the U.S. Department of Education issued regulations that, among other things, represent a sweeping departure from past policy in the area of prohibited inducements and the use of preferred lender lists in the Federal Family Education Loan (FFEL) Program. The Department's new direction in this area affects colleges, lenders, guaranty agencies, and servicers. The action follows months of congressional hearings and highly publicized investigations by New York Attorney General Andrew Cuomo and other State attorneys general into alleged abuses in the federal student aid programs. The new regulations take effect July 1, 2008.
Additionally, in the wake of the recent enactment of the College Cost Reduction and Access Act of 2007 (CCRAA), which made significant cuts to federal subsidies paid to private lenders, Congress now seems poised to consider additional measures affecting the industry as it works to reauthorize the Higher Education Act of 1965 (HEA).
The new regulations will have a substantial impact on colleges, lenders, guaranty agencies, and servicers. With an effective date of July 1, 2008, FFEL Program participants have a window of opportunity to bring their activities into compliance. In the coming months and years, we expect increased scrutiny by the Department and by other federal and State governmental agencies of the relationships between FFEL Program participants.
We are actively engaged in advocacy efforts surrounding HEA reauthorization and will provide updates as events warrant.
If you have any questions regarding this e-Alert, please contact Jonathan Vogel (202.408.5309 or jvogel@sonnenschein.com), Todd Weiss (202.408.9109 or tweiss@sonnenschein.com), or your regular Sonnenschein attorney.
Click here to read the full e-Alert.
These materials should not be considered as, or as a substitute for, legal advice and they are not intended to nor do they create an attorney-client relationship. Because the materials included here are general, they may not apply to your individual legal or factual circumstances. You should not take (or refrain from taking) any action based on the information you obtain from this document without first obtaining professional counsel and you should not send us confidential information without first speaking to one of our attorneys and receiving explicit authorization to do so.
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