UPDATE 1-US Congress tackles student loans,new abuses cited
(Adds Kennedy report details, lender groups' comment, byline)
WASHINGTON, Sept 4 (Reuters) - With Congress poised to act within days on reforming the $85-billion student loan industry, Sen. Edward Kennedy released a report on Tuesday alleging more instances of marketing misconduct among lenders and colleges.
The Massachusetts Democrat, chairman of the Senate Education Committee, said the panel's investigative report details improper ties among lenders, universities and alumni groups focused on winning preferential treatment for lenders.
"The findings of the report underscore the urgent need for reform of the student loan system," he said in a statement.
Senate and House of Representatives negotiators are getting closer to finalizing a student loan bill to send to the White House based on measures approved earlier this year by both chambers. Senate Majority Leader Harry Reid said on Tuesday he expects the Senate to finish the bill by the end of the week.
Four student loan industry lobbying groups sent a letter on Friday to Kennedy and other lawmakers expressing concern about the schedule for implementing changes expected to come out of the reforms and asking for more time.
"Many of the provisions that affect lenders, servicers and guaranty agencies have an effective date of October 1 ... (We) will have only days to make the necessary changes," said the letter from groups including the Education Finance Council.
After months of scandal that embarrassed the industry, Congress is speeding ahead on reforms because lawmakers and the White House see a chance to score a domestic policy achievement before the Iraq war and the 2008 elections crowd other issues from the agenda for months to come, aides said.
Both Congress and President George W. Bush want to cut federal subsidies paid to lenders, such as Sallie Mae (SLM.N), Citigroup Inc. (C.N) and Bank of America Corp. (BAC.N).
But they differ over how deep the cuts should go and over related issues, such as how much to boost student grants and whether to test a student lender auction program.
As House and Senate negotiators conferred on such issues, the Kennedy report made allegations that resembled many others made in recent months by his committee, the House education committee and New York Attorney General Andrew Cuomo.
In numerous examples, the Kennedy report alleged that college officials and loan company executives treated preferential lender treatment as a business advantage to be bargained over for a range of potential favors and payments.
"Our continuing investigation shows that schools and financial aid offices often solicit, and lenders provide, various types of in-kind compensation that could otherwise be used to reduce students' loan burden," the report said.
But Sen. Mike Enzi on Wyoming, top Republican on the Senate education panel, criticized the Kennedy report as "built on vague, inconclusive evidence and poorly documented allegations."
"I am disappointed that this report ... is taking up the Senate's time -- when we should be moving forward to get final approval of the bipartisan Higher Education Amendments act," Enzi said in a statement. (Reporting by Kevin Drawbaugh)
