Today I awake to find that I’m close to getting my wish.
With scandal rattling the $85 billion student loan industry, Education Secretary Margaret Spellings argued at a House hearing on Thursday that she lacked legal authority to clamp down on many abuses.
Ms. Spellings faced pointed questioning at the hearing from Congressional Democrats, who accused her department of mismanagement and complacency.
Several Democrats, led by Representative George Miller, questioned her aggressively, asserting that she had regulatory power and moral influence that she had neglected to wield to stop loan companies from paying universities or giving gifts, trips, stock and consulting payments to the university financial aid officers who guide students toward loans.
Mr. Miller, the California Democrat who heads the education committee, also took up a separate issue of questionable federal subsidy payments to lenders.He particularly criticized Ms. Spellings’s decision to ignore a recommendation of the department’s inspector general that she recover $278 million in federal subsidy payments improperly obtained by Nelnet, a lender based in Nebraska. He also said the Justice Department was now reviewing the inspector general’s September audit that found Nelnet ineligible for those payments.
After the hearing, a Justice Department spokesman, Charles Miller, did not contradict Representative Miller’s assertions, but said, “We have no comment at this time.”[emphasis added]
Mr. Miller openly dismissed Ms. Spellings’s portrayal of her department’s monitoring of student lending as robust. He also criticized the department for its oversight of Reading First, a program designed to teach poor children to read that has been besieged by reports of conflicts of interest among Education Department consultants.
“When I look at the whole body of evidence that has been amassed about both the student loan and Reading First programs, it is clear that — at a minimum — the Education Department’s oversight failures have been monumental,” he said.
“We monitor these programs vigorously,” Ms. Spellings replied.
“Who is monitoring?” Mr. Miller shot back. “Do they have blinders on?”
The department has also come under scrutiny from Congress for its failure to halt millions of dollars in subsidy payments to lenders that exploited loopholes to inflate their eligibility for subsidies on the student loans, including those paid to Nelnet.
Mr. Miller and other lawmakers pressed Ms. Spellings, the lone witness, to explain her decision in January to allow Nelnet, a major contributor to Republican campaigns, to keep the $278 million. In exchange, Nelnet agreed not to bill for nearly $900 million in subsidies it believed it was eligible for.
Ms. Spellings said that she thought the fact that the department had been paying the subsidies without question could have put it in legal jeopardy and that Nelnet might have prevailed in a lawsuit.
Representative John F. Tierney, Democrat of Massachusetts, said, “It boggles my mind — we allowed somebody to get away essentially with theft.” [emphasis added]