House Passes Student Loan Sunshine Act

Last week, the House passed the Student Loan Sunshine Act by a vote of 414-3. The legislation will require full disclosure of lender relationships with colleges and universities.

The public recently learned that private loan companies are sometimes offering gifts to college employees--like all-expenses-paid vacations-- in return for being placed on a "preferred lender" list that encourages students to finance their education through those lenders. Rep. George Miller (D-CA), chair of the Education and Labor Committee, said:

"At a time when more and more students and families are relying on loans--and incurring greater amounts of debt--in order to pay for a college education, it is beyond shameful that some private lenders are courting colleges with gifts and incentives that often do not help students or parents. These unethical practices abuse the trust that students and parents place in schools and lenders when they take out a loan, and undermine the credibility of the student aid system. Students should be steered towards lenders that will give them the best terms, not towards companies that send college employees on an all-expenses-paid Caribbean vacation."

The Committee on Education and Labor also held a hearing on apparent corruption in the Reading First program. Margaret Spellings, the embattled Education Secretary, testified. Her department is responsible for overseeing the $85 billion-a-year student loan industry.

"The Education Department’s oversight failures have been monumental," said Rep. George Miller (D-Calif.), chairman of the committee. "Was this simply laziness? Was it incompetence? Was it a deliberate decision to look the other way while these things happened? Or was it a failing more sinister than that?"

Miller disclosed at the hearing that the Justice Department is examining a controversial accounting loophole used by Nelnet, a Nebraska-based lending company, in an attempt to collect more than $1 billion in government subsidies. Spellings decided this year to halt the payments but allowed Nelnet to keep $278 million it had collected.

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Spellings offered her fullest explanation yet of the decision to settle with Nelnet, saying she believed there was a significant chance that the company would have won if it had filed a lawsuit against the government to continue receiving payments.

But Miller, in one of several verbal sparring sessions with Spellings, said the explanation made little sense. "If it's such an easy case for them, why did they walk away from $1 billion?" he asked.

Senators Ted Kennedy (D-MA) and Dick Durbin (D-IL) recently introduced a companion bill to the Student Loan Sunshine Act in the Senate.

Comments (2) «

Making money off of other peoples' problems is the Republican way, as well as trying to fool everyone about what they are really doing.

1

SandyH on May 14, 2007 at 07:09 PM

A good first step. Now, what about some more steps to help students?

2

Butte on May 14, 2007 at 08:20 PM

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