The Sunshine Act
What’s the Issue?
The Student Loan Sunshine Act was passed by the House of Representatives on May 9, by an overwhelming vote of 414-3. The Act protects students and parents from exploitation by private student loan lenders and lenders who offer gifts to colleges as a way to secure loan business. The result of these relationships between the lenders and institutions results in more than just limited choices for consumers. Students and families have become the target of aggressive marketing for private loans. Private loans carry interest rates as high as 19 percent, compared to federal loans that are offered at 6.8 percent.
How does this affect me?
The Sunshine Act would clean up the relationships between student lenders and institutions by:
- Requiring full disclosure of special arrangements that lenders and institutions of higher education have to offer loan products at the institution;
- Banning lenders from offering gifts worth more than $10 to college employees, including travel, lodging, entertainment, and in-kind services that lenders provide to college financial aid officers;
- Requiring full disclosure of the reasons why an institution of higher education has selected a lender for its "preferred lender list," including any special arrangements the lender has with the school; and
- Encouraging borrowers to maximize their borrowing through the government's loan programs before taking out alternative loans and direct-to-consumer loans with higher interest rates.