Education Secretary Counters Cuomo’s Criticism

U.S. Education Secretary Margaret Spellings has responded to criticism from New York State Attorney General Andrew Cuomo of her department’s oversight of education lenders. During an April 25 hearing before the U.S. House Committee on Education and Labor, Cuomo said that “the U.S. Department of Education has been asleep at the switch” regarding oversight of alleged unethical practices by some education lenders.

In a prepared statement Spellings called Cuomo’s testimony “ill-informed on the Department’s action and on federal law.”

Cuomo’s investigation has focused largely on alleged improprieties involving private, nonfederal student loans. In her statement Spellings noted, “Any suggestion by a state attorney general that a violation of a state’s deceptive trade practices and/or a state’s fraud law would equate with an automatic violation of Title IV of the Higher Education Act (HEA) is misleading.”

Spellings noted that the Department is conducting its own investigation of potential violations of federal law and that she has established a task force that will recommend regulations to the secretary on key lender issues, such as prohibited inducements, preferred lender lists and the National Student Loan Data System.

Spellings is scheduled to appear before the House committee on May 10.

Loan-service providers endorse business-practice guidelines
Meanwhile, two trade associations that represent service providers in the Federal Family Education Loan Program have endorsed an updated set of guidelines for student-loan-business practices. The Education Finance Council and National Council of Higher Education Loan Programs, of which USA Funds^® is a voting member, announced that the new principles build on guidelines for FFELP practices set forth by student-loan associations in 2004.

“Participants in the FFELP are committed to the highest ethical standards in helping students and families pursue postsecondary education,” the two associations reported.

You will need Adobe Reader to access Cuomo’s testimony as well as the EFC and NCHELP “Student Loan Business Practices.