AAU agrees to financial aid principles

The Association of American Universities has agreed to a set of principles that dictates the relationships between schools, financial aid offices and student lenders.

The organization, made up of 60 U.S. public and private research universities, developed the set of principles after New York Attorney General Andrew Cuomo launched an investigation into questionable college lending practices.

Cuomo has said his investigations have uncovered numerous arrangements that benefited schools and lenders at students' expense. For example, investigators say lenders have provided trips for college financial aid officers who then steered students to the lenders.

The principles, agreed on by the AAU at a meeting this week in Washington and announced Thursday, reaffirm the need for schools to ensure student lenders are selected based on an assessment of student borrowers' best interests, and that schools should disclose the criteria for recommending lenders.

According to the agreement, schools should inform students and parents they may select the lender of their choice, and should not penalize students for selecting a lender not on a preferred lender list.

The agreement also states that school employees involved in, or responsible for, student financial aid programs shouldn't accept any personal benefits.

The institutions should make sure lender representatives disclose their affiliation and not imply they are school employees, and should also see that no lender may promote a particular lender's loan product, according to the agreement.

"While the principles enunciated by the AAU are a good start, they only address some of the conflicts we have found and do so very vaguely," Cuomo said Thursday in a written statement. "The code of conduct we have developed is far more comprehensive and specific."

Cuomo has criticized revenue-sharing agreements in which schools receive a percentage of the money that lenders make through student loans. He has told lawmakers his investigation may lead to criminal charges against individual financial aid officers.