The college class of 2007 is basking in the glow of graduation. But in the coming months, more than half of the new graduates will face a harsh reality: the need to begin repaying their student loans.

Like many of them, I have a lot of student-loan debt. And like many, I write a check each month to Sallie Mae, the biggest student loan company in the country. Recently, Sallie Mae sent me a very official-looking e-mail noting that I might be eligible for a lower interest rate. But I needed to act fast, said the e-mail, because "Congress has recently proposed legislation that would significantly increase costs to lenders," a move that will "likely force lenders to reduce or eliminate benefits offered to borrowers."

So Congress is planning to increase the cost of loans, right? No. The proposed legislation, which was recently approved by the Senate Education Committee with bipartisan support, would actually help student borrowers. It promises to reduce the huge profits that the government guarantees lenders in the federal loan program and pass along the savings to students in the form of interest-rate cuts. In this e-mail, Sallie Mae, which is so profitable that it was sold for $25 billion, is threatening to stick students with the bill for a law designed to help students.

This e-mail provides a window into the world of student borrowers, who in recent years have been willfully ignored by lenders and—in many cases—their own university financial aid offices.

Seeing the problem

Rep. George Miller, D-Calif., chairman of the House Committee on Education, recently asked the Federal Trade Commission to investigate this type of deceptive marketing. (If only it was just this one e-mail.) But as the recent spate of lawsuits, congressional hearings and high-profile resignations by financial aid administrators at schools such as Johns Hopkins and Columbia University demonstrate, lenders have unduly influenced many university financial aid offices. They've showered officials with everything from free lunches to stock options.

A Senate report on the student loan industry found that these problems are not isolated to a few lenders or schools. As a result, many universities have lost the independence, or the appearance of independence, that they need to give students fair, accurate advice.

The federal government has been of little help. The Education Department Inspector General's office released a report last year that criticized the federal government's lack of oversight of the student loan industry. Yet the report was issued with barely a whimper.

New York Attorney General Andrew Cuomo, who has led the investigations into illegal arrangements between loan companies and financial aid offices, has accused the Education Department of being "asleep at the switch," while lenders improperly influenced financial aid officers.

Finally, action

Fortunately, steps are being taken to increase oversight of the student loan industry:

• The Education Department issued a (belated) proposal for new regulations on the dealings between lenders and financial aid offices.

• The Senate legislation would provide lenders and financial aid officers with more specific rules on what qualifies as an illegal "inducement"—a good start toward restoring independence.

• Lenders and universities are taking steps to stem conflicts of interest, signing on to a code of conduct drafted by Cuomo.

• The Federal Trade Commission, in response to Miller's request, launched an inquiry into deceptive marketing practices in the loan industry.

But all this action will only help if the Education Department steps up its oversight and begins to consistently enforce regulations.

Unless this happens, I, along with millions of other graduates and students, will continue to wonder whether we're being fleeced by the very system put in place to protect us.