Spellings Testifies Before House Education and Labor Committee

On Thursday, Secretary Margaret Spellings testified before the House Education and Labor Committee on the U.S. Department of Education’s (ED) oversight of both the student lending industry and the Reading First program. Unlike the previous hearings on these topics, Secretary Spellings was present to defend her agency’s actions.

Committee Chairman George Miller (D-CA) did not seem overly satisfied with the explanations Spellings offered, but the hearing ended with a tentative agreement that Congress and ED have more work to do to oversee these programs.
As Spellings, Miller, and Rep. Howard “Buck” McKeon (R-CA), the ranking Republican on the committee, gave their opening remarks, it was clear where each participant intended to steer the discussion. Chairman Miller immediately pointed to conflicts of interest uncovered in both programs under investigation. He mentioned copies of contracts between a student lender and five school financial aid officers or other officials. The lender in question compensated the school officials for promoting their services. He also mentioned the conflicts of interest that existed regarding Reading First program officers and royalties they received when the program used a specific instructional tool in which they had a financial stake. Miller made it clear that the responsibility for oversight in these areas lay with ED, and that ED failed to properly enforce the rules and regulations that govern conflicts of interest in government agencies.
Secretary Spellings countered that ED has initiated “thousands” of audits of colleges across the country, even levying fines on specific schools found to be out of compliance with department regulations regarding lending practices. Chairman Miller seemed to disagree with her assessment, mentioning that ED’s audits did not address the specific issues that New York Attorney General Andrew Cuomo uncovered in recent months. However, Spellings countered that most of the loan scandals involved private lenders, over whom ED has no jurisdiction or oversight. Republicans on the committee, such as McKeon and Rep. Ric Keller (R-FL) reaffirmed Spellings’ claim that she is powerless to stop private lender abuse without Congressional involvement. Rep. Keller was deliberate in explaining that, despite Attorney General Cuomo’s comments blaming ED for “falling asleep at the switch,” his investigations focused solely on private lenders, and not the two federal loan programs.
Spellings did take time to point out that, in her few short years in office, she has brought together the Commission on the Future of Higher Education, as well as beginning a new rulemaking process to deal with lender practices. Not one to sit and take abuse, Spellings made a point to mention that she has initiated the rulemaking process because of inaction on Capitol Hill. Most of Spellings’ testimony, as well as statements from the committee’s Republicans, focused more on how ED and Congress have and can continue to fix the problems in the student lending industry. Miller, McKeon, and Spellings, all paid lip service to the newly passed H.R. 890, the Student Loan Sunshine Act, which sets up new rules regarding preferred lending practices among public universities.
The bill, which passed on a 414-3 vote on Wednesday, will require schools to disclose all relationships with lenders, ban lender staffing of school financial aid offices or help lines and require schools to conduct annual audits. Miller, who recently sent a letter to Spellings asking that she ban preferred lenders lists, compromised on this bill. Instead of abolishing preferred lender lists, the bill simply ensures students have to be informed that they also can borrow from a lender not on the school’s preferred-lender list. The bill also bars aid administrators from serving on bank boards and would ratchet up disclosures required by schools and lenders alike. A similar bill exists in the Senate, though there is no timeline for when the bill will reach the Senate floor.
Although Spellings did not win over Democrats with her explanations and promises of future action, all parties agreed they can do more to reform the troubled system. Miller has referred to the Student Loan Sunshine Act as one step in reforming the student lending practices and college affordability as a whole. While Congress works towards legislation, Secretary Spellings has promised further action towards reforming the lending industry, by forming a task force, along with the Federal Trade Commission and the Federal Deposit Insurance Corp., to look into how the government might better regulate the private student loan market. Spellings is certainly not done with answering to House oversight, and she still has to deal with Senator Edward Kennedy (D-MA) and his committee.
Resources:
Libby George, “House Moves Quickly to Rein in Student Loan Abuses; Senate May Be Slower,” CQ Today, May 9, 2007.
Libby George, “Education Secretary Defends Oversight of Troubled Student Loan Industry,” CQ Today, May 10, 2007.
Doug Lederman, “Sparring With the Secretary,” Inside Higher Ed, May 11, 2007.
Author: SAS