Roundup: Week of May 7 – May 11

Bipartisan Sunshine Bill Flies Through the House

The House of Representatives passed the bipartisan Student Loan Sunshine Act by a 413 to 3 vote yesterday. The bill would ban student loan companies from offering any gifts to financial aid offices, entering into revenue-sharing or “opportunity loan” agreements with colleges, and staffing call centers or other financial aid office-related operations. Colleges would have to create their own student loan codes of conduct and disclose all financial relationships with lenders. In addition, college officials would be prohibited from serving on lender advisory counsels. Preferred lender lists would be allowed, but colleges would have to include at least three lenders, explain the process by which those lenders were selected, and act in concert with fiduciary duties of care and loyalty to students.

New York Times Profiles 9.5 Percent Loan Whistleblower

A front page New York Times article on Monday profiled Jon Oberg, a former researcher at the Department of Education who became a whistleblower for the 9.5 percent loan scandal. The New America Foundation first unveiled Obergs identity at an event last September where he described publicly his role in addressing the scandal. Oberg attempted to alert Department officials in 2003 to lender abuse of 9.5 percent subsidy, and was told to stop investigating the issue and focus on grant research instead. The Department claims that it was not aware of the extent of improper recycling of 9.5 percent loans before its Inspector General issued an audit last September. But the Government Accountability Office issued a report on 9.5 percent loan abuse in 2004, and many other parties have been publicizing the improper payments for several years. In past years, the Department argued that it did not have the authority to issue “subregulatory guidance” cutting off the subsidy payments, which is exactly the action it took in January after the Nelnet audit.

Shaw to Step Down from Office of Federal Student Aid

Theresa Shaw, the chief operating officer of the Department of Educations Office of Federal Student Aid, will be resigning from the position on June 1, the Department announced Wednesday. Shaw was appointed to take charge of federal oversight of the student loan programs in 2002 by Secretary of Education Rod Paige, after working as an executive at Sallie Mae for 20 years. The Department said that Shaw had notified Secretary of Education Margaret Spellings in late February of her “plans to take some time off,” and insisted that her departure was “absolutely not” related to the recent student loan scandals. New Americas Education Policy Program Director, Michael Dannenberg, called Shaws tenure one characterized by a “lax of oversight and negligent administration of the student loan programs.” It was Shaws office that made hundreds of millions of dollars in improper 9.5 percent loan payments to Nelnet and other lenders despite repeated red flags being raised within the Department of Education. Congressman Howard “Buck” McKeon (R-CA) cited Dannenbergs comments in a Capitol Hill hearing with Secretary Margaret Spellings and asked her to respond. She praised Shaws tenure.