Roundup: Week of October 8 – October 12

Hillary Clinton Includes Two New America Policy Proposals in Her Education Plan

Two New America policy proposals: required multi-year tuition levels and greater use of endowments to aid low-income students were included in a sweeping plan to improve higher education unveiled by Presidential candidate and Senator Hillary Rodham Clinton (D-NY) Thursday. In addition to proposals for increasing Pell Grants, the proposal calls for a partially refundable tuition tax credit worth $3,500, more than double the existing Hope Tax Credit. In total, the plan would cost around $8 billion annually, and would be partially financed by eliminating the guaranteed student loan program.

Cuomo Targets Direct Marketers

New York Attorney General Andrew Cuomos investigation into student loan practices continued on another front yesterday as his office issued subpoenas to dozens of companies that market loans directly to students and their families. In a written statement, Cuomo accused the companies of engaging in “misleading and deceptive tactics to entice young borrowers seeking college loans.” Cuomos office found that some lenders and direct marketers were engaging in activities such as offering financial rewards to applicants, sending fake checks or rebates to lure students into calling a companys toll-free number, and sending letters or maintaining Web sites designed to look like they were officially connected to the federal government. The companies subpoenaed included Nelnet, Student Loan XPress, Bank of America, and Wachovia Bank.

Sallie Mae Sues Potential Buyers

The drama over the proposed Sallie Mae buyout continued this week, as the student loan provider filed a lawsuit against its proposed buyers in the Delaware Chancery Court on Tuesday. The suit requests that the investor group, led by the private equity firm J.C. Flowers & Co, either complete the deal at the previously agreed upon price of $25 billion or pay a $900 million “breakup fee.” The investor group had previously tried to renegotiate the deal by lowering their per share offer from $60 to $50. The buyers claimed that instability in the credit markets and pending lender subsidy cuts had represented a “material adverse effect,” allowing for one party to terminate the deal without penalty. Despite reporting losses of $344 million in the third quarter, Sallie Mae continues to claim the legislation will have no adverse affect and the terms of the original contract should be honored. “The lawsuit filed by Sallie Mae rests on a fundamental misunderstanding of the terms of our contract, and is without merit,” the investor group said in a statement. “This is a dispute that should be resolved in the boardroom, not the courtroom.”

House Republicans Introduce Version of Higher Ed Reauthorization Bill

The Republican leaders of the education committee of the U.S. House of Representatives have introduced a Higher Education Act reauthorization (HEA) bill that would eliminate a groundbreaking pilot auction program, recently enacted by Congress, that will use market forces to set student loan subsidy rates on federal loans for parents and graduate students. The measure, which was introduced by Reps. Howard P. (Buck) McKeon of California and Ric Keller of Florida, would also increase the authorized maximum level of the Pell Grant to $6,000 over the course of five years; raise federal student loan limits; and loosen provisions in the law that are meant to protect students from unscrupulous, fly-by-night trade schools. In a statement on their website, the Republican lawmakers argued for eliminating the law’s new pilot auction program, on the grounds that it is “untested.”

Lumina Foundation Names New President

Jamie Merisotis, a well-respected student aid expert, has been named president and chief executive officer of the Lumina Foundation for Education, a nonprofit organization focused on financing projects that address issues surrounding college access and success for low-income students. Merisotis is currently the president of the Institute for Higher Education Policy, a nonprofit research firm that he founded in 1993. At Lumina, he will replace Martha Lamkin, who plans to retire at the end of the year.