Nov. 1, 2007

The Education Department’s Activist Agenda

Education Secretary Margaret Spellings continues to try to counter the twin perceptions of her Education Department as lax on enforcement on the one hand and inappropriately meddling in the affairs of colleges on the other.

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During a news conference Wednesday, Spellings listed a “litany” of steps her department had taken in recent months on a range of regulatory and policy fronts — “scratching lots of itches,” as Spellings put it in her down-home manner of speaking. Several of her efforts — like the release today of final federal rules to govern the relationships between lenders and college officials and a ratcheting up of the department’s scrutiny of universities where most students borrow from a single lender — seemed designed to challenge the view (favored by some Democratic members of Congress) that the Bush administration had let abuses in the student loan industry to develop by being asleep at the switch.

And other parts of Spellings’ presentation — her review of the department’s recent grant to three higher education associations to develop better ways of measuring student learning, for instance — sought to leave the impression that the secretary is fulfilling her vow to work “with” colleges on issues of accountability and transparency, rather than stick it “to” them, as some higher education officials have complained. At various turns, Spellings appeared to want to portray the department as an activist, yet collaborative, federal agency.

Most of the efforts Spellings discussed will be old news to faithful readers of Inside Higher Ed, including:

• Today’s release in the Federal Register of a final version of new federal rules designed to govern the interactions between lenders, college officials and prospective borrowers, regulations that the department proposed in June and on which financial aid officers and lenders commented in August. Among other things, the rules, which take effect next July, will bar gifts of anything of more than nominal value from lenders to financial aid officers; require colleges’ lists of preferred lenders to contain at least three unaffiliated loan providers; and would require significantly more disclosure to students about their rights as borrowers. Spellings said the department was preparing a “Dear Colleague” letter urging the student loan industry and campus administrators not to wait until the rules become final to start carrying them out.
• The secretary’s attempt to jumpstart conversations among various federal agencies about who is responsible for what in overseeing the market for private student loans, which Spellings has argued is largely outside the purview of the Education Department, which has direct authority over federally backed loans. Spellings said the “interagency work group” that she had assembled — including the Federal Trade Commission, the Federal Reserve, the Securities and Exchange Commission and the Office of the Comptroller of the Currency — planned a second meeting next month, and that her agency and the Federal Trade Commission had begun monthly meetings to consider the best ways to respond to consumer complaints about the student loan industry, an issue that has been raised by New York Attorney General Andrew Cuomo and U.S. Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee.
• The department’s awarding of a $2.4 million grant to the American Association of State Colleges and Universities, the Association of American Colleges and Universities, and the National Association of State Universities and Land-Grant Colleges to help them assess existing, and develop new, tests and other tools to measure student outcomes on a wide range of skills. Officials of the agency and of the higher education groups heralded as a breakthrough in government-higher education collaboration.

If there was a nugget of new news in what Spellings and Under Secretary Sara Martinez Tucker discussed Wednesday, it was that the department had followed up a batch of letters it sent to 921 colleges in July expressing concern that at least 80 percent of their federal student loan volume was held by one lender. Department officials have characterized a single lender’s domination of a college’s loan volume as a red flag, providing evidence that the institution is directing prospective borrowers to that lender (which usually appears on its list of “preferred lenders") and raising questions about why.

Tucker said on Wednesday that the department had sent new letters to 55 colleges, all of which had at least $10 million in federal loan volume and most of which distributed at least 95 percent of their federally subsidized through one lender, as well as to 23 student loan providers with which those colleges did business. Tucker said the letters (a sample of which can be found here) requested additional information about their arrangements with lenders, to make sure that “nothing untoward” has been done to consumers and that students are given a choice of lender, as federal law requires. “We are not accusing [the colleges] of anything illegal at this point in time,” Tucker said. Department officials said they would release a list of the institutions and lenders that received the letters only in response to a federal Freedom of Information Act request, which can take several weeks to fulfill.

Spellings also effusively praised the plan formally unveiled Wednesday by the National Association of System Heads and the Education Trust in which 19 public college systems have agreed to cut in half within eight years their gaps in college-going and college graduation rates for low-income students and those from underrepresented minority groups. Spellings called those behind the effort “true leaders and pioneers in the academy.”

— Doug Lederman

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