Educating the Education Secretary

14 May 2007 // “It’s not our fault.” That’s what Education Secretary Margaret Spellings seemed to say while testifying before Congress last week about her department’s failure to halt the payoffs, kickbacks and general looting of the public treasury by a lending company that collected nearly $300 million in undeserved subsidies. But that doesn’t track with the federal Higher Education Act, which clearly authorizes the secretary to disqualify from federal programs lenders who employ payoffs, kickbacks and unethical practices like those that have been found to be commonplace in the college lending business.

Angry at the department’s failure to control corruption in the loan program, Congress has taken the unusual step of reiterating the secretary’s powers in the Student Loan Sunshine Act, which passed the House last week. The bill, which deserves to pass the Senate, too, makes it a crime for lenders to offer colleges anything of value in exchange for the right to do business at a given school. It authorizes the secretary of education to fine, suspend or even terminate lenders who violate the new guidelines.

The new bill requires colleges to explain publicly why they placed a given lender on the school’s “preferred lender” list. It expressly bans kickbacks, payoffs and so-called revenue sharing arrangements. If this bill becomes law, students applying for loans will be entitled to all kinds of information that they had trouble getting in the past. For example, before offering pricey private loans, lenders would have to inform students that they might be eligible for less expensive federal loans.

The proposed law makes for a marked improvement over the current situation. But it won’t make up for what has developed in the current Department of Education, where officials have seemed more interested in kowtowing to the lenders than anything else. Congress should think of some way to insulate the oversight office from partisan tampering. It could be moved into the department’s inspector general’s office — or it could be moved out of the department altogether.