Bush Administration 'Asleep at the Switch' on College Loan Oversight, Attorney General Cuomo Tells Education Committee
Chairman Miller Announces that Secretary Spellings Will Testify before Committee May 10 on Department's Oversight of Student Loans, Reading First

Wednesday, April 25, 2007

WASHINGTON, DC -- The U.S. Department of Education has been "asleep at the switch" when it comes to conducting oversight over the nation's federal student loan programs, New York State Attorney General Andrew Cuomo told the House Education and Labor Committee during an investigative hearing today. As a result of he Department's lack of oversight, corrupt practices and conflicts of interest that undermine the programs have been allowed to flourish.

The hearing was part of an ongoing investigation that Rep. George Miller (D-CA), the chairman of the committee, has launched into the inappropriate relationships among lenders, schools, and the public officials responsible for running the federal student aid programs. Miller, who recently called on U.S. Education Secretary Margaret Spellings to take emergency actions to reform the student loan industry, announced today that the Secretary will appear before the committee on Thursday, May 10, to testify about the Department's oversight of programs under its control, including the college loan programs and the Reading First program for young children.  

"This administration's failure to conduct proper oversight or hold the student loan industry accountable has harmed student and family borrowers and taxpayers, all of whom ultimately pay the price for these corrupt practices," Miller said. "There is no question the Secretary has defaulted on her responsibilities to protect the interests of students and parents who are working harder than ever to pay back these loans."

In his testimony today, Cuomo, whose own nationwide investigation has unearthed the widening scope of abuses within the industry, said congressional action was urgently needed in the Department"s absence. "Part of the reason the practices we have uncovered have been able to flourish nationwide over the past several years is because the U.S. Department of Education has been asleep at the switch. The practices we have uncovered were not undiscoverable until now. Rather, the entity charged with maintaining the integrity of the student loan market failed," said Cuomo. "The failure of the Department to pass adequate regulations is disappointing and irresponsible."

Cuomo also said that legislation introduced by Miller and other committee Democrats earlier this year, the Student Loan Sunshine Act, would be an important step towards cleaning up the relationships betweens lenders and schools.  Among other things, the legislation would require lenders and schools to fully disclose the nature of their relationships and would ban lender gifts worth more than $10. As his investigation continues, Miller said he plans to expand on the legislation.

During the hearing, Cuomo announced that two of the nation's largest student lenders, JP Morgan Chase and Bank of America, have agreed to adopt a code of conduct intended to prevent deceptive relationships between lenders and schools.            

Cuomo also indicated that there is a possibility he will file criminal charges in some of the cases he is investigating.

"At a time when the students and families are incurring more debt than ever to attend college, protecting the educational and financial interests of students should be our top priority. These problems have been allowed to fester for too long and passing the Student Loan Sunshine Act is an immediate first step we can take to restore Americans' faith in the student loan process," said Rep. Ruben Hinojosa (D-TX), the chairman of the Subcommittee on Higher Education, Lifelong Learning, and Competitiveness, a co-sponsor of the bill.

"Ensuring that borrowers can have full confidence in our nation's student aid system is a critical part of our goal of making college more affordable and accessible," Miller said. "What we learned today will help bring the sea change of reforms needed to put these programs back in the hands of those it was intended to serve: students and families."

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

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FOR IMMEDIATE RELEASE
Contact: Tom Kiley / Rachel Racusen
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