In light of recent alleged student loan scandals that occurred at other colleges, the University of California announced last week that it will implement new procedures next year to avoid campus-lender collusions.

In an Oct. 3 press release, the UC Office of the President stated it will develop a common rating system for loans based on the borrower’s best interest. Additionally, UCOP will bar campus loan officials from receiving incentives for promoting specific loans. The procedures are set to begin in the 2008-09 school year.

The alleged scandal over unethical loan practices broke last spring when financial aid officers at the University of Southern California, Columbia University and the University of Texas, Austin as well as an official in the Department of Education were each found to own stock in a loan company. Investigators found that financial aid officers at numerous schools, including New York University and Syracuse University had allegedly accepted either personal incentives or money for their schools in exchange for including a lender on the school’s loan list, even if the terms of the loan were not in the students’ best interest.

The UC’s new policy places several restrictions on relationships between the University campuses and lenders. Specifically, financial aid offices are prohibited from accepting payment from a lending company in exchange for inclusion on a preferred lender list. However, each campus is permitted to negotiate with lenders in order to obtain better terms for UC students.

Additionally, individual campuses will now have a standard format through which they will present key information about a variety of loans in easily compared fashions.

Currently, UCSB is a direct lending school. Once financial aid officials determine a student’s eligibility for federal loans, the money comes directly from the Department of Education, rather than from a subsidized private lender. Under this policy, UCSB did not need to interact with banks and other private lenders.

UCSB Director of Financial Aid Ron Andrade said the new policy did not reflect any problems in the UC financial aid system, but that the University was using the recent scandals at other campuses as an opportunity to clarify previously undefined policies.

“We still don’t participate in the bank loan version of the federal loan program [but] now that we’re back in the arena of having to interact with banks, there is need to provide guidance to students on what kind of loans are out there,” Andrade said. “The Office of the President decided that we needed to make sure that we had a standard by which all the campuses were creating their lender list and that there was no one doing anything that could be construed as conflict of interest.”

According to UC Spokesman Ricardo Vazquez, the University has a responsibility to help students and parents make smart financial aid decisions as the cost of higher education increases.

“The policy affirms [the] UC’s obligation to help students and parents find the best possible loans,” Vazquez said. “Especially as loans become more complex and lenders increase direct-to-consumer marketing campaigns, we do think the institution has a responsibility to be a source of objective info for parents and students.”

Margaux Granat, a UCSB alumnus, said she believes lenders push students into signing a loan without explaining the terms.

“Trying to get a loan was a huge hassle,” Granat said. “It’s a really hard process to understand, to know all the information about when you have to start paying it back, etc. [An official spreadsheet] is definitely going to be helpful.”

Each campus’ list will include important information such as the terms and features of the loan and services provided by the lender during the lending period. UCOP stated it will gather this information from lenders annually and will base ratings solely on factors that benefit the borrower.