Chairman Miller Calls on Education Department to Implement Emergency Reforms in Student Loan Industry
Secretary Must Immediately Impose Moratorium on Colleges' "Preferred Lender Lists," Says Miller

Wednesday, April 18, 2007

WASHINGTON, DC -- U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, today called on U.S. Education Secretary Margaret Spellings to take emergency action to reform the nation's student loan programs to ensure they are operating in the best interests of college students and families, including imposing a moratorium on schools' "preferred lender lists" and putting a stop to lenders' bribes to schools. Many colleges and universities maintain a "preferred lender list" to offer guidance to student borrowers about their options for college loans. Ongoing investigations into the student loan industry have recently revealed the widespread abuse of this preferred lender list by both lenders and schools and rampant conflicts of interest. 

"From lenders' extravagant kickbacks to college employees, to questionable stock holdings by public officials and financial aid officers, to lenders' exploitation for profit of the national student loan database, there is no question that our nation's federal student loan programs are spinning out of control under the watch of the Department of Education," Miller said. "All of these corrupt practices carry a surcharge for students and families who are working very hard to pay these loans back. It is long past time for the Secretary to exercise her authority and take the steps that are urgently needed to clean up these programs."

In a letter to the Secretary today, Miller called for the Department of Education to immediately take the following actions in order to ensure that federal student loan programs are operating to the maximum benefit of students, families and taxpayers:

1.  Impose a moratorium on "preferred lender lists." 

2.   Clearly define and end bribes paid by lenders.

3.   Require full disclosure.

4.   Instruct schools and lenders to cease and desist all conflicts of interest.

5.   Conduct oversight of Department of Education employees. 

Additionally Miller called on the Secretary to launch a public campaign to actively educate students and families about their rights and options when borrowing for college, and make public all records of loan industry meetings with political appointees so that the Congress and the American public better understand who at the Department was being lobbied by the industry.

In February Miller introduced legislation, the Student Loan Sunshine Act, that would require both lenders and schools to fully disclose the nature of their relationships and would ban gifts from lenders to institutions worth more than $10. Miller has also recently announced that the Education and Labor Committee will hear from New York Attorney General Andrew Cuomo at a hearing on April 25th examining these conflicts of interest and egregious practices within the industry.

"At the very time that our nation's students and families are struggling more than ever to afford college, our top priority is to ensure that borrowers can have full confidence in the nation's student aid system and that these programs are working as intended to help them pay for college," Miller said. "We must exhaustively investigate the extent of the corruption undermining these programs, and learn how we can build on our proposed legislation to fully protect students and families."

For more information on Miller's proposed actions, click here. To view Miller's letter to Spellings, click here.

For more information on Miller's investigation into the student loan industry, click here.

FOR IMMEDIATE RELEASE
Contact: Tom Kiley / Rachel Racusen
2181 Rayburn House Office Building
Washington, DC 20515
202-226-0853