"The Department of Education has been delinquent in its oversight responsibilities over the student loan industry," said Representative George Miller, Chairman of the House Education and Labor Committee in a letter to Secretary Margaret Spellings yesterday. Miller also called on Secretary Margaret Spellings to take immediate and "emergency action to reform the nation’s student loan programs to ensure they are operating in the best interests of college students and families."
"From lenders' extravagant kickbacks to college employees, to questionable stock holdings by public officials and financial aid officers, to lenders' exploitation for profit of the national student loan database, there is no question that our nation's federal student loan programs are spinning out of control under the watch of the Department of Education," said Miller in a related press release.
In the letter to Spellings, Miller specifically demanded that the Secretary respond in writing, within ten days, with an update on the status of five emergency action items. These items would require Spellings to do the following:
- Impose a moratorium on all preferred lender lists "until we can ensure that these lists no longer feed corruption and cronyism."
- "Clearly define and end bribes paid by lenders [by explaining] why the Department has failed for the past six years to publish regulations on inducements paid by lenders to colleges and universities."
- Require all schools and lenders to make public "any and all relationships that present conflicts of interest."
- Require that all schools and lenders cease all conflicts of interest.
- Require the Inspector General to investigate "all senior Department of Education employees that work on higher education issues to ensure they have no conflicts of interest with student lenders."
Miller also requested that the Secretary launch a public campaign to educate families about their rights and options when using student loans.
He further urged Spellings to make public all loan industry meetings with political appointees so that Congress and the public will know who at the Department has been lobbied by lenders.
NASFAA continues to monitor and respond to developments that are sure to have an enormous impact on schools, students, and families. Larry Zaglaniczny, NASFAA Director for Congressional Relations stated, "Chairman Miller is correct that the Department of Education has not provided adequate oversight or enforcement on these issues. I do not think we would be experiencing the problems we are today had ED publicly investigated these improprieties earlier."
Zaglaniczny continued, "Unfortunately, a few in our profession have made mistakes and we cannot ignore the negative perception that has been cast on all of us. Still, the vast majority of NASFAA members serve their students and families well and a moratorium on the use of preferred lender lists would have unfortunate consequences to borrowers. I fear that it will have very negative consequences for students and families who may be persuaded by direct-to-consumer marketing tactics and choose loan products that have less attractive loan terms and conditions than those found on a school’s preferred lender list."
Other Media Coverage
By Justin Draeger
NASFAA Assistant Director for Communications
Posted 04/19/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
