Student Lender Paid College Officials, Miller Investigation Reveals
Chairman Miller Renews Call for Secretary to Take Emergency Actions to Reform Student Loan Industry

Wednesday, May 9, 2007

WASHINGTON, DC -- Until recently, one of the nation's largest student lenders had hired officials from five different colleges to perform various services even as the officials continued on their colleges' payrolls, according to documents provided to U.S. Rep. George Miller (D-CA) as part of his investigation into unethical practices in the student loan industry. The lender, JP Morgan Chase, also paid over $70,000 for a harbor cruise in New York City for over 200 college financial aid officers in 2005.

Miller, the chairman of the House Education and Labor Committee, today sent the Chase documents to U.S. Education Secretary Margaret Spellings and again urged her to take immediate action to investigate and prevent unethical practices in the federal student loan programs.

"While it's become clear over the last few months that conflicts of interest are pervasive in the student loan industry, it still stands out as particularly egregious that a lender would pay officials on the university payroll," said Miller. "No matter which way you slice it, it is wrong for any financial aid office employee to also be working as a paid consultant for a lender.  And at a time when students and parents are going into serious debt to pay for college, it is wrong for lenders to pick up the tab for lavish cruises held under the guise of a financial aid conference. Time and time again, we have learned of the greed and corruption compromising programs upon which students and families depend. The Secretary must immediately take action to stop these egregious practices once and for all."

Miller uncovered the documents after requesting information from five of the largest lenders in the country about the nature of their relationships with school financial aid offices and public officials. In his letter to Spellings today, Miller again renewed his call for the Department of Education to immediately take emergency actions to reform the student loan industry to prevent any future conflicts of interest among lenders, schools, and the public officials responsible for running the nation's federal student aid programs.

Last month New York Attorney General Andrew Cuomo, who has been leading his own probe into the student loan industry, testified at a committee hearing that the Department's failure to conduct oversight of the student loan programs has allowed conflicts of interest to flourish. Secretary Spellings will appear before the committee on Thursday, May 10, at a hearing examining the Department's mismanagement of both the student loan and Reading First programs.

To view the documents provided by JP Morgan Chase, click here.

The full text of Miller's letter to Spellings is below.

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May 9, 2007

The Honorable Margaret Spellings
Secretary of Education
U.S. Department of Education
400 Maryland Avenue, SW
Room 7W301
Washington, DC 20202

Dear Secretary Spellings:

As you know, on March 29, 2007, the Committee began an investigation of the nation's largest federal student loan providers concerning their relationships with college financial aid offices.  As you also know, New York Attorney General Andrew M. Cuomo appeared before the Committee on April 25, 2007, and testified about what he called "several significant, deceptive, and illegal practices," which were "widespread throughout the country and throughout the many segments of the industry."

As a result of my investigation, I am disheartened to inform you that we also have uncovered additional conflicts of interest among lenders and school officials.  Because other Members of the Committee and I remain steadfast in our determination to ensure that the federal student loan programs are operated to the maximum benefit of students, families, and taxpayers, I am providing you with documentation of some of the practices we have uncovered.  Enclosed you will find:

• Copies of contracts between a lender and five school financial aid officers or other officials, who were compensated by the lender to provide services to schools and others.
• Receipts for a lavish dinner cruise and entertainment provided to select student financial aid administrators attending a national conference.

In closing, I would call to your attention my April 18, 2007, letter to you in which I urged you to take emergency action to immediately resolve problems in the federal student loan programs.  Specifically, I recommend that you (1) impose a moratorium on "preferred lender lists"; (2) clearly define and end bribes; (3) require full disclosure of relationships that may present conflicts of interest; (4) instruct schools and lenders to cease and desist all conflicts of interest; and, (5) conduct oversight of Department of Education employees.

The top Federal official responsible for administering and overseeing the nation's student loan programs also must be responsible for establishing, advocating, and maintaining an ethical atmosphere for the implementation of these programs, to provide guidance for proper behavior and to ensure meaningful consequences for improper behavior.  Once again, I urge you to take immediate action as outlined above to ensure the integrity of the federal student loan programs.  The nation's students, parents and taxpayers deserve nothing less.

Sincerely,

GEORGE MILLER
Chairman

cc: Senior Republican Member Buck McKeon

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