Education secretary defends oversight of student loan programs

Education Secretary Margaret Spellings announced Thursday that she is convening the heads of the Federal Trade Commission, Federal Deposit Insurance Corporation, Securities and Exchange Commission and Federal Reserve "to coordinate a governmentwide endeavor to end student loan abuse" in both the Federal Family Education Loan and private loan programs.

She used an appearance before the House Education and Labor Committee to defend her department's oversight of student loan programs and its response to disclosures of questionable ties between private lenders and college financial aid officials. And as lawmakers criticized her department, she turned the tables on them by asserting that Congress' failure to reauthorize the Higher Education Act since it expired in 2003 has made it "my duty to expedite reform."

Referring to higher education, Spellings said: "I've probably been the most active secretary in this arena in a long time."

As she went on the offensive, House Education and Labor Chairman George Miller, D-Calif., took Spellings to task for the mismanagement of student loan and the Reading First elementary school programs, declaring "the department hasn't acted on this with any haste or urgency."

A noticeably heated Miller told her, "When I look at the whole body of evidence that has been amassed . . . it is clear that, at a minimum, the Education Department's oversight failures have been monumental."

He and Education and Labor ranking member Howard (Buck) McKeon, R-Calif., co-sponsored legislation that easily passed the House Wednesday to bring more transparency to the industry's ties to colleges. The bill also seeks to halt potential conflicts of interest by banning school officials from accepting gifts, financial perks and kickbacks from lenders, who have doled out such sweeteners to earn a spot on preferred lender lists.

In her testimony, Spellings announced that an Education Department task force created in April to examine the industry will soon be recommending similar statutes, including a ban on inducements and more transparency behind the creation of preferred lender lists.

Citing areas of common interest, Spellings told committee members she wanted to use two bills Miller hopes to move this year -- the Higher Education Act and No Child Left Behind reauthorizations -- to improve oversight and education programs. She criticized the "high legal barrier" in the higher education law that requires the department to prove improper relations between schools and lenders before taking action.

"Federal student aid is crying out for reform," she added, urging the committee to pass a full five-year reauthorization of the higher ed law instead of a one-year renewal.

Miller said that even with congressional action, "my concern about the department is in the broad the sense of its image since 2001."

Miller recently widened his investigation into the department's dealings with student loan providers by requesting information from Spellings and White House officials dating back to the beginning of the Bush administration in 2001.

Miller has also formally asked the FTC to look into deceptive marketing practices within the lending industry.