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Lawmakers Tackle Higher Ed Issues

Student loans and campus security draw scrutiny from lawmakers and regulators.
University Business, Jun 2007

FROM HINTS OF SCANDAL IN the private student loan industry to campus security in the wake of the Virginia Tech shootings, lawmakers and regulators are grappling with higher ed issues that have emerged unexpectedly, and tragically, since the start of the year.

Overshadowed by the headline-grabbing developments is the long-delayed reauthorization of the Higher Education Act (HEA), which appears finally to be moving forward, although quietly.

Capturing more attention: problems in private student lending that have raised questions about oversight of the $85 billion industry. Taking the usual course of action, House and Senate education committees are conducting separate investigations of issues that have shaken confidence in the integrity of the lending process. The U.S. Department of Education has acted on its own to address problems revealed.

In one quick move, the DOE cut off outside access to the National Student Loan Data System (NSLDS), a government database containing personal financial information for 60 million students. NSLDS access is supposed to be granted solely to help determine eligibility of applicants for federal student aid and the collection of student loans and grant overpayments. The information cannot be used for any other purpose, including the marketing of student loans or other products.

But Sen. Edward M. Kennedy (DMass.), chairman of the Senate's Health, Education, Labor, and Pensions Committee, wrote to Secretary of Education Margaret Spellings of his concern about reports that private lenders were using the databaseto search and retrieve confidential information about student borrowers without their permission. More disturbing, Kennedy wrote, was that lenders apparently were using the information to aggressively market to students. "The privacy of every borrower must be a top priority" for the education department, Kennedy said.

Private lenders may have been using National Student Loan Data System information to aggressively market to students.

Besides shutting down the database, at least temporarily, Spellings responded to Kennedy with a six-page letter defending how her department was monitoring the student loan industry, including a disclosure that since 2003 the agency has revoked 261 user IDs granting access to the database. She said the department was concerned that its oversight of the database had revealed "a significant increase in usage by lenders, loan holders, services, and guaranty agencies." They held most of the IDs that the agency has revoked.

The database is only one lending issue capturing the attention of Washington's higher ed community, lawmakers, and regulators. Equally prominent are revelations of relationships between some college and university financial aid officers and lending companies that appear to have constituted conflicts of interest and resulted in higher loan costs for student borrowers.

The Senate and House education committees have joined the attorneys general of several states in an investigation initially launched last fall by New York state Attorney General Andrew Cuomo that has implicated financial aid directors at six institutions of higher ed and a senior program manager at the Department of Education.

At the heart of the issue: allegations that some aid officers have steered students to certain lending companies in exchange for financial kickbacks from the lenders. Many IHEs maintain lists of preferred lenders to offer guidance to student borrowers about their options for college loans, and investigators have revealed widespread abuse of the lists by both schools and lenders.

Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee, called on Spellings to impose a moratorium on preferred lender lists, end bribes paid by lenders, require full disclosure of the relationships between lenders and schools, and instruct both to end their conflicts of interest.

Earlier, Miller introduced the Student Loan Sunshine Act, passed by the House in May and, as of press time, pending in the Senate. The act would require full disclosure of the nature of lender/school relationships and would ban gifts worth more than $10 from lenders. Kennedy has introduced similar legislation.

The senior Republican on the House committee and its former chairman, Rep. Howard (Buck) McKeon (R-Calif.), introduced his own reform measure to improve disclosure for students and establish safeguards to prevent conflicts of interest in the student loan industry.

Among other things, McKeon's proposal the Financial Aid Accountability and Transparency Act would require IHEs to develop a code of conduct for staff who work with student loan programs. The code would limit gifts, payments, or other financial benefits including the opportunity to purchase stock that are or may appear to be a conflict of interest.

Further, any institution with a preferred lender list would have to adopt a formal written policy about how it selects those lenders and make clear to students that they are free to borrow from any lender.

Meanwhile, Spellings announced the formation of a task force inside the Education Department that will recommend new student loan regulations that the secretary said she expects to publish in final form on or before November 1. In addition to examining the issues of preferred lender lists and prohibited inducements, the task force will discuss the use of the NSLDS.

While student lending is likely to be front and center for much of the year, the Virginia Tech shootings caused the Senate Committee on Homeland Security and Government Affairs to quickly begin consideration of how to prevent more tragedies on college campuses. At a hearing the week after the killings, senators heard testimony about the difficulties IHEs face in recognizing and controlling the types of individuals who might commit such heinous crimes.

David Ward, president of the American Council on Education and a former chancellor of the University of Wisconsin- Madison, said the unique nature of college campuses open in design and with a large number and variety of facilities that are open 24 hours a day make them as vulnerable as any city, regardless of where any particular institution is located.

Open in design and with some facilities open 24 hours a day, college campuses are as vulnerable to crime as any city.

Ward also noted that in 2005 the most recent year for which statistics are available there were 42 violent crimes per 100,000 students on college campuses, compared with 2,000 violent crimes per 100,000 people in the general population.

While it's unclear what will result from a congressional look at campus security, the Senate committee's ranking Republican, Sen. Susan Collins (R-Maine), asked witnesses for opinions on possible changes in medical and school records privacy laws.

A House Education subcommittee has been quietly completing work on a HEA reauthorization measure that was the priority higher ed issue two years ago when the previous Congress convened. It became lost in the shuffle of other legislative initiatives.

On behalf of 15 higher ed associations, ACE sent the subcommittee reauthorization recommendations. One calls for expanding and augmenting the Pell Grant program, including increasing the maximum grant to $11,600 in 2012 and permitting institutions to award year-round Pell Grants, allowing students to get two grants in one calendar year and make accelerated progress toward a degree or certificate.

Other recommendations include smoothing the borrowing and repayment process for all students, such as by simplifying the financial aid process to improve access to college for low-income students. The associations also call for supporting international education, creating a new disaster loan assistance program, and expanding efforts to ensure that students with disabilities receive a quality education.

On the international front, ACE also protested an increase in visa and other immigration service fees proposed by the U.S. Citizenship and Immigration Service. Funded solely by the fees it collects, the agency claims the increases are needed to improve customer service, modernize its business infrastructure, and strengthen the security of the immigration system.

Writing on behalf of seven other higher ed associations, ACE asserts that the higher fees "will have a predictably chilling effect" on the number of international students coming to college in the United States.

In another development, the National Academies' Research Council issued a report calling for more support from all levels of the U.S. education system to develop an integrated approach to improving foreign language skills and expertise on other cultures. IHEs would play key roles in the effort, partnering with federal officials to create systems to continuously improve the programs, according to the report, "International Education and Foreign Languages: Keys to Securing America's Future."

Meanwhile, the Department of Education plans to hold five mini-summits this month as a follow-up to a higher ed summit held in Washington in March. At that meeting, about 300 representatives from colleges, universities, associations, government agencies, businesses, and other organizations met to discuss what the Education Department might do with the recommendations last year of Spellings' Commission on the Future of Higher Education.

The mini-summits in Atlanta, Boston, Kansas City, Phoenix, and Seattle will involve students and others who could not travel to Washington and consider local and regional perspectives on the commission's national recommendations.

Alan Dessoff, a former reporter for The Washington Post, is a Bethesda, Md.-based freelance writer.

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