Calm Amid the Storm

As student loan scandal swirls, House hearing largely focuses on the nuts and bolts of making college more affordable.
May 2, 2007

As the seemingly nonstop barrage of accusations and news reports about student loan practices continued unabated Tuesday, it would not have been surprising if a previously scheduled House of Representatives hearing on college access and financial aid devolved into another ring in the circus.

But the new chairman of the House Subcommittee on Higher Education, Lifelong Learning and Competitiveness, Rep. Ruben Hinojosa (D-Tex.), has diligently sought to focus on substance in a series of hearings that he has held in recent weeks to discuss possible steps the panel might take in legislation to renew the Higher Education Act. Previous hearings had been about the role of education in America's global competitiveness and preparing low-income and first-generation students for college; Tuesday's was entitled, "Paying for a College Education: Barriers and Solutions for Students and Families."

So while there was much discussion of some of the intricacies of the federal student aid programs, and lots of brainstorming about how to make college more affordable for students, the loan mess was hardly mentioned, brought up in one or two statements and in one pointed question directed at one of the witnesses, A. Dallas Martin, president of the National Association of Student Financial Aid Administrators, whose group has been criticized for its sometimes defensive tone and for its perceived failure to police its own members.

Martin brought the subject up himself in his opening statement to the subcommittee, in which he said he hoped the "current controversy" would result in "some additional legislative clarity on what is or is not permissible" in the relationships between colleges and lenders. "We must be careful," Martin added, "not to impose unnecessary restrictions that would make it impossible for responsible collaboration to occur among these parties," and said it was important that financial aid administrators continue to be able to give students and their families sound advice about how to pay for college.

In response to questioning from Rep. Thomas Petri (R-Wis.), who invited Martin to explain why NASFAA's board, in 2004, had rejected a proposal that would have restricted gifts from lenders to financial aid officers, and to justify the sponsorship payments the group accepts from banks and other student loan providers.

Martin, who seemed almost relieved by the gentleness of the question and the chance to clear the air, said he and other officials "regret seriously some of the things that have come to light," which he characterized as "misbehavior on the part of a few individuals and very poor judgment." He acknowledged that the group's board had been deeply divided over the 2004 proposal, with some advocating tougher action and some believing it went too far, but noted that the association is now in the midst of a broad review of its policies. "We must and we will make certain that [financial aid officers] are operating with transparency and putting students' needs first," Martin said.

Beyond that one exchange, the witnesses kicked around a wide range of ideas for how to put college within reach of more Americans. The witnesses -- Luke Swarthout, higher education advocate for U.S. PIRG, James A. Boyle of College Parents of America, and Claude O. Pressnell Jr., vice chairman of the Advisory Committee on Student Financial Assistance, in addition to Martin -- widely agreed that increasing federal and other spending need-based financial aid and minimizing the complexity of the financial aid application process (including the Free Application for Federal Student Aid) were key. They also agreed on the dangers that have arisen and are looming as students -- facing ever-greater tuition bills -- become increasingly dependent on expensive (and less well regulated) private or "alternative" loans.

Boyle emphasized the need to help middle class families, too, by increasing federal limits on how much students can borrow (which would also diminish the need for private loans, he said) and making permanent the federal tax deduction for college expenses. The witnesses also discussed the need for much greater financial literacy for students and parents, and Petri seized on Swarthout's advocacy for legislation that would make students' loan repayment contingent on their post-college income.

Developments in the Loan Scandal

As the members of the House subcommittee were discussing income contingent repayment, needs analysis and the other fine points of student financial aid, the chairman of the full Committee on Education and Labor, Rep. George Miller (D-Calif.), was issuing a letter calling on Education Secretary Margaret Spellings and the White House to release all documents relating to the Bush administration's policies on the relationships between student loan providers and college officials.

The letter comes in the wake of a front-page report Tuesday by The Washington Post that the Education Department had, in 2001, quashed a lingering Clinton administration proposal that would have imposed restrictions on possible "inducements" that lenders were perceived as giving to colleges as the time -- precisely the practices that are the source of much of today's controversy.

A spokesman for Republicans on the House education panel called the Miller letters -- which also sought information from the Education Department and the White House on the department's controversial "Reading First" program -- "overly broad and politically motivated fishing expeditions" that "will not restore faith in these programs – programs that continue helping millions of students learn to read and attend college, even to this day."


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