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WASHINGTON - Congressman Tom Petri is raising questions about what he calls a "troubling relationship" between the nation's largest student loan company and the guaranty agency that oversees it and insures its loans.
"Current law requires that lenders operating in the Federal Family Education Loan (FFEL) program remain independent from the guaranty agencies that are supposed to keep them honest, but a 51-page contract was recently leaked which reveals a highly questionable relationship between the lender, Sallie Mae, and the guaranty agency, USA Funds," said Petri, who sent a letter to Education and Labor Committee Chairman George Miller (D-CA) and Howard "Buck" McKeon (R-CA), the ranking Republican, asking them to look into this matter.
According to The Chronicle of Higher Education, which first reported on this issue, the contract gives Sallie Mae "extensive financial and organizational control" over USA Funds.
Petri said, "Even more disturbing is the fact that in 2004 the Department of Education ignored its own Inspector General's recommendation that a conflict of interest needed 'to be cured' between the two entities. Instead, the Department ruled that the relationship raised no such concerns."
The Chronicle report, dated June 26, 2008, noted that the Department's decision was made by a former employee of Sallie Mae who is now on administrative paid leave because of an ongoing ethics investigation.
"This Congress, the Education and Labor Committee has endeavored to clean up the waste, fraud, and abuse that has plagued the FFEL program. This most recent revelation raises serious concerns of possible manipulation of the FFEL program, and it once again brings into question the propriety of the relationship between the Department and the entities it oversees," Petri said his a letter to Miller and McKeon.
"I believe this Committee should look into this contract which is still in effect as well as any other similar contracts between guaranty agencies and lenders. Serious questions need to be answered regarding the relationship between Sallie Mae and USA Funds, the findings of the Inspector General, and the Department's response," he wrote.
Click here for a PDF copy of Rep. Petri's letter to Chairman Miller and Rep. McKeon.
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