The House gave overwhelming approval last week to a bill that would set new limits on the relationships between lenders and colleges participating in the federal student-loan program.
Meanwhile, Democratic lawmakers confronted Secretary of Education Margaret Spellings at an occasionally testy May 10 hearing by the House education committee, asking why she hadn鈥檛 used her influence to stop lenders from providing perquisites and financial incentives to college officials who steered business toward them. They also asked why the Department of Education hadn鈥檛 closed a loophole allowing lenders to overcharge the federal government for loans made in the program.
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鈥淎t no time did anybody at the department pick up the phone and say, 鈥榊ou鈥檝e got to stop it鈥�?鈥� Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee, asked Ms. Spellings, referring to lenders鈥� offering benefits such as cruises for college officials who administer student-loan programs or paying them to serve on advisory committees.
Ms. Spellings responded that the student-aid law establishes 鈥渉igh hurdles鈥� for her to act, essentially requiring her to prove a 鈥渜uid pro quo鈥� between the gifts given by lenders and actions taken by student-loan officials at colleges.
Republicans on the committee said that the Bush administration had fixed several financial problems in the student-loan program that existed in 2001, when President Bush took office.
In 2003, independent auditors gave the Education Department a clean audit for the first time in six years, and in 2005, the Government Accountability Office, for the first time in 15 years, removed the student-loan program from its list of federal programs that were at high risk for fraudulent activity, Rep. Howard P. 鈥淏uck鈥� McKeon of California, the committee鈥檚 ranking Republican, said at the hearing.
New York state Attorney General Andrew M. Cuomo has investigated the financial relationships between school officials and lenders, saying that school officials violated the 鈥渞elationship of trust鈥� between students and school officials. (鈥淪tudent-Loan Controversy Is Drawing Wide Concern,鈥� May 2, 2007.)
Taking Action
Despite the partisanship in evidence at the hearing, the House acted with near unanimity on May 9 in an effort to address the problems recently uncovered in the student-loan program. The vote approving the legislation was 414-3.
Called the Student Loan Sunshine Act, the measure would bar gifts from lenders and would prohibit college officials from receiving compensation for serving on lenders鈥� advisory committees. It also would require that colleges and universities disclose their relationships with lenders, and that so-called preferred-lender lists be compiled 鈥渨ith the students鈥� best interest in mind,鈥� according to a summary of the bill.
The Senate is weighing a companion bill.
Earlier last week, Ms. Spellings announced that Terri Shaw, the chief operating officer of the division known as Federal Student Aid, would retire on June 1, the end of her five-year term.
