The U.S. Senate passed legislation on July 24 that will reauthorize the Higher Education Act of 1965 – a law that oversees student-aid programs financed by the government – and boost federal funding for student aid.

The legislation also addresses the recent scandal involving the student-loan industry and the ongoing investigation by the office of New York Attorney General Andrew Cuomo by limiting both the use of preferred-lenders listings at colleges and any rewards a college may receive for recommending certain lenders to students. A nationwide code of conduct that would prevent college employees from making financial arrangements with loan companies and receiving a share of the companies’ profits in exchange for promoting specific lenders is also a provision of the new bill.

In addition, the legislation would improve the government’s ability to oversee the rate at which college tuition increases by placing colleges whose tuition is greater than that of a “higher-education price index” on a federal list. The government will also require colleges to make public their procedures regarding academic credit transfers.

The bill hasn’t yet been introduced in the House, where it will likely be considered after August.

The bill would impact federal student-aid through the Pell Grant, a form of federal funding that is given to students who show the greatest financial need. It will increase the maximum Pell Grant award to $6,300, while raising the minimum grant amount to 10 percent of the maximum.

Margaret Rodriguez, senior associate director in the University’s Office of Financial Aid, said she was encouraged by the new legislation.

“Though further negotiation between House and Senate members will occur before the actual increase in the Pell Grant is finalized, we are very happy that legislation proposed in both the House and the Senate recognizes the need for increases in federal funding for our needy students,” she said in an e-mail.

Rodriguez said that because federal loans provide students with funds directly from the government, the University is able to bypass private lenders.

“The issues described recently in the press about incentives and preferential treatment are not an issue for us,” Rodriguez said. “We are supportive of legislation that removes the possibility of abuses in the federal loan programs.”

Rodriguez also said that the University does not promote a list of preferred-lenders for private loans.

“We place no restrictions or barriers to students using the lender of their choice,” Rodriguez said. “Likewise, we offer no incentives to students for using a particular loan provider.”

Rodriguez said the bill’s aim to limit profitable arrangements between lenders and colleges does not apply to the University.

“Neither U-M nor any of its employees receive any benefit from any lender to have access to student borrowers,” Rodriguez said.

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