Washington, D.C. - Today, Congressman Dale E. Kildee (D-MI) and Chris Van Hollen (D-MD) introduced legislation to reform lending practices of universities and colleges which operate as direct lenders to students.  This legislation comes on the heels of findings released by the General Accountability Office (GAO) that the Department of Education has failed to provide adequate oversight on schools which operate as lenders under the Higher Education Act.

“This bill will create safeguards to ensure that universities and colleges are not abusing the school as lender program at the expense of students,” said Kildee.  “It’s critical that we ensure that schools operating as lenders are responsible stewards of the taxpayer subsidies they receive and the profit they generate.”

“We need to ensure the integrity of the federal student loan program and target available resources where they’re needed most,” said Van Hollen.  “That’s what this bill does.”

The Kildee-Van Hollen bill would reform the school as lender program to ensure greater financial accountability and that loan profits are used for grant aid for needy college students. 

This new legislation would:

• Ensure that all profits from loans made by schools would be used for grant aid for needy college students.

• Require that grant aid derived from loan profits is in addition to and not instead of existing financial aid for students.

• Require competitive bidding for any lender related activities for which a school contracts with outside entities.

• Require schools operating school as lender programs to offer a less costly loan package to students than is permitted under the law.