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AEP Online |
Secretary Spellings Questioned In Front Of House Education and Labor CommitteeOn Thursday May 10, 2007, Chairman George Miller questioned Secretary of Education Margaret Spellings before the House Education and Labor Committee. Originally, the hearing was to cover the Reading First program issues and the recently publicized student loan trouble. Most of the hearing ended up being devoted to questions about the student loan problem. Inducements and the settlement with provider NELNET topped legislators concerns. Lenders began the practice of inducements at least ten years ago, if not longer, so that financial aid offices would direct students to certain loan providers. Most of the inducements were in the form of stock options to the directors of financial aid and in one case to a U.S. Department of Education official. Andrew Cuomo, Attorney General of New York, has settled with several of the financial institutions and loan companies including Student Loan Xpress, Sallie Mae, Citibank, Bank of America, and Education Finance Partners. Up to 6,000 institutions of higher learning may be involved. According to the Secretary, most of the inducements could not be directly connected to the granting of a specific loan, and, therefore, she was unable to take any enforcement action. The majority of members were clearly not satisfied with this reply. Members reminded her that in 2003 the USED Office of Inspector General suggested that there might be improprieties in the awarding of inducements that should be monitored. Rep. Andrews asked her why the "flurry of activity" around reconciling the problems only began in January 2007, when she knew of problems as early as August 2004. Spellings replied, "we did stop one lender, but it was only when we had direct evidence the inducements were tied to a loan." Spellings was also asked about her settlement with the provider NELNET, in which she rejected the advice of her own OIG at a cost of nearly $300 million. The entire scandal made national news when Attorney General Cuomo began exposing the problem early in 2007. One member of the committee inferred Cuomo was using the issue for publicity. Rep. Keller reminded the committee that during Cuomo's tenure as HUD Secretary the agency was listed as high risk for waste, fraud and abuse by the GAO. Spellings also reminded the committee that the student loan division of the USED was removed from that same list in 2005. Last Wednesday legislation was passed that will address many of the issues that were raised in Thursday's hearings. The bill was a bi-partisan effort and also supported by Secretary Spellings. HR 890, The Student Loan Sunshine Act passed 414-3 and moves on to the Senate. Questions, ideas, or in need of more information? Please contact Stacey Pusey at 856-241-7772. |
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