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WASHINGTON, DC -- U.S. Rep. George Miller (D-CA), chairman of the House Education and Labor Committee, today asked the Government Accountability Office to investigate whether nonprofit student lenders are abusing their tax exempt status by enriching their top executives.
“Nonprofit student lenders enjoy special benefits, such as exemption from federal income taxes. In exchange, they must honor their charitable mission, which is to help financially-strapped students pay for college," said Miller. “Nonprofit lenders exist to help students pay for college. When they stray from that mission, they shouldn’t enjoy any special benefits."
Earlier this week, The Washington Post reported that EduCap, a nonprofit student lender based in McLean, Virginia, had purchased a $30 million private jet and had paid its top executive $1 million in compensation, among other extravagant expenditures.
Miller has investigated and uncovered corrupt practices among lenders participating in the federal student loan programs. In response, the House overwhelmingly passed legislation to clean up the abuses. For more information, click here.
Miller made his request to the GAO in a letter sent this morning. The full text of the letter is below.
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July 18, 2007
The Honorable David M. Walker
Comptroller General of the United States
U.S. Government Accountability Office
441 G Street, NW
Washington, DC 20548
Dear Mr. Walker:
Millions of middle class American students and their families rely on access to an affordable education to succeed in the competitive job market and to preserve their quality of life. Over the last several months, investigations of the student loan industry by this Committee and other lawmakers have revealed significant financial conflicts of interest between lenders and schools as well as deceptive marketing practices. As a result of the unethical practices and the lack of oversight exercised by the U.S. Department of Education, the House of Representatives overwhelmingly passed legislation – the Student Loan Sunshine Act – which among other things requires lenders and schools to report on their relationships.
Recent news accounts underscore yet another concerning matter within the student loan industry: To what extent do tax-exempt organizations making education loans to students abuse their tax-exempt status? Tax-exempt organizations enjoy special tax treatment under the law, a benefit that exempts certain lenders from paying taxes on the interest income earned on its loans. Moreover, tax-exempt organizations are not subject to all of the same oversight required of banks and other financial institutions, and may also be involved in deceptive marketing practices.
In light of the Committee’s findings of unethical behavior in the student loan industry and recent news accounts, I request the Forensic Audits and Special Investigations (FSI) unit of Government Accountability Office to conduct a preliminary investigation of whether tax-exempt organizations making student loans are abusing their tax exempt status, and involved in deceptive marketing. Please coordinate your investigation with the Committee’s Chief Investigative Counsel, Michael Zola, who can be reached at (202) XXX-XXXX.
Sincerely,
GEORGE MILLER
Chairman
Cc: Senior Republican Member Howard “Buck" McKeon
FOR IMMEDIATE RELEASE
Contact: Tom Kiley / Rachel Racusen
2181 Rayburn House Office Building
Washington, DC 20515
202-226-0853
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