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Spellings Defends Record on Student Loans
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Spellings Defends Record on Student Loans


Spellings Defends Record on Student Loans
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Secretary of Education Margaret Spellings used a congressional hearing today to defend her oversight of the student loan industry. Facing criticism that she's been blind to conflicts of interest between lenders and universities, Spellings said she's been way in front of Congress in pushing for change.

NPR's Larry Abramson was there.

LARRY ABRAMSON: The script for this hearing was supposed to go like this: In her first appearance before a Democratically run House Education and Labor Committee, Margaret Spellings faces blistering criticism. Chairman George Miller demanded to know why it took an investigation by New York Attorney General Andrew Cuomo to expose conflicts of interest in the industry.

Representative GEORGE MILLER (Democrat, California; Chairman, House Education and Labor Committee): People were caught and the official showed up at their front door and said this practice is unethical and illegal. But nobody from the Department of Education showed up at the front door. That's what I don't understand.

ABRAMSON: But if Miller came loaded for bear, Spellings was wearing a Kevlar vest. Spellings' staff put together a list of actions the secretary has taken to streamline what she called the Byzantine nature of the student loan business. Miller's committee has found that lenders threw lavish parties for university officials including a catered cruise across New York harbor. But Spellings said, in fact, Congress has tied her hands when it comes to enforcing conflict of interest rules against lenders.

Ms. MARGARET SPELLINGS (Secretary, Department of Education): The hurdle that must be cleared by the department for us to assert a violation is a quid pro quo relationship between the awarding of a particular loan and the cruise on -of New York harbor, for example.

ABRAMSON: While Spellings testified, her staff zapped emails to the media to underscore department efforts in this area. They were aided by cooperative Republicans on the committee who lobbed softballs like this one from Republican Buck McKean of California.

Representative BUCK McKEAN (Republican, California): Madam Secretary, did you ever imagine you would be expected to be the ethics police for our nation's colleges?

ABRAMSON: In other words, private industry shouldn't need a federal parent to say it's wrong for banks to pay schools for a piece of the student loan business. Republican Rick Keller of Florida noted that improprieties have only been found among private loans that students take out, not with those backed by the U.S. government.

Representative RICK KELLER (Republican, Florida): As a U.S. secretary of education, do you have jurisdiction to conduct oversight and regulation of these alternative private loans which aren't federal loans guaranteed under Title IV of the Higher Education Act?

Ms. SPELLINGS: No, sir. I don't.

ABRAMSON: Chairman Miller said that's no excuse. Spellings' job, he said, to actively look for bad actors. Miller said New York's Andrew Cuomo found that private and federally backed loans all go through the same lenders like industry leader Sally Mae.

Representative MILLER: Well, they're connected when the person says we'll give you private money if you give us more federal access to the program, and Sally Mae did. And when he blew the whistle on them, they promised to never do that again. Other lenders have been yelling about that practice for a long, long time.

ABRAMSON: Spellings said she can't police the entire banking industry and thus was born the latest task force of federal regulators that spellings said she's convened to root out the problem.

Larry Abramson, NPR News, Washington.

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