In Baltimore, the scandal hit close to home when the Johns Hopkins University learned that Student Financial Services Director Ellen Frishberg received $65,000 in consulting fees from a lender that her office recommended to students. Nearly every week we learn of another scandal - lenders sponsor dinner cruises and lavish trips, schools accept payments from lenders based on loan volume, lenders pay university officials as if they are on the payroll, a lender settles for $2.5 million for its kickback arrangements.

The House last week passed the Student Loan Sunshine Act by an overwhelming 414-3, and the Senate is poised to add similar provisions in the Higher Education Act next month. The House bill would, among other things, regulate the ways that schools recommend lenders to students; require more disclosure of the relationships between schools and lenders; ban gifts, participation on advisory boards, and other inducements to school financial aid officials; and require that schools and lenders inform students of their borrowing options.

In response to calls for direct loans, the lending industry and some conservative lawmakers often talk about how they prefer the "market-driven" approach of the guaranteed loan program, because the "market" will be more efficient. Markets are good - when they work. For the loan market to work, lenders would need to compete both for the government subsidies and for the students' business by offering real comparative value instead of offering financial aid officers "consulting fees" over filet mignon.