Congress approves student loan bill

By Georgina Coolidge

WASHINGTON (Reuters) - Legislation that seeks to protect college students from lending abuses while boosting student aid was approved by Congress on Thursday.

The bill, which would require lenders and colleges to adopt strict codes of conduct, passed the Senate 83-8 after the House voted 380-49 for the measure.

Once signed into law by President George W. Bush, the bill would ban lenders and colleges from offering or accepting payments or gifts in exchange for making loans, a response to scandals uncovered last year involving kickback schemes and conflicts of interest between lenders and school officials.

"We got rid of cronyism, kick backs and sweetheart deals," said Sen. Barbara Mikulski, a Maryland Democrat who took over leadership on the bill after education committee chairman Sen. Edward Kennedy was diagnosed with a brain tumor.

Other features of the bill include increased funding for graduate study at institutions that primarily serve minorities and new scholarship programs and support centers for military veterans.

Pell grants that go to low-income students, would increase to $6,000 from $4,800 for 2009, and to $8,000 for 2014.

The bill follows other legislation passed during the last 10 months aimed at overhauling the student loan industry.

Last September, Congress passed a bill to provide an additional $20 billion in federal college loans to students over the next five years but slashed subsidies to lenders.

Lawmakers passed another bill in April to allow the Education Department to buy federal student loans from lenders unable to sell them on the secondary market, as a capital crunch stemming from the subprime mortgage crisis threatened student lending.

Major student lenders include Sallie Mae, JPMorgan Chase, Citigroup Inc, and Bank of America Corp, among many others.

The bill passed by Congress on Thursday would require colleges that identify preferred lenders to provide students with information about why the colleges think the lenders' terms and conditions are favorable.

(Reporting by Georgina Coolidge; Editing by Tim Dobbyn and Carol Bishopric)