BREAKING NEWS: Loan to Learn Restructuring; Major Layoffs
Blog Post
July 31, 2007
EduCap -- which markets private student loans under the brand name Loan to Learn -- announced on Wednesday that it has substantially reduced its student lending operation. George Pappas, a spokesman for the company, told The Chronicle of Higher Education that the company was scaling back "due to the uncertainties in the student-loan industry and financial markets."
EduCap has recently come under heavy scrutiny by Higher Ed Watch and others. The United States Senate's tax committee, as well as the Internal Revenue Service, and the Government Accountability Office are examining charges that the company's chief executive officer, Catherine B. Reynolds, has abused the organization's nonprofit form by using benefits derived from its tax exempt status not to serve the public good but to enrich herself and her family, and to raise her standing in the world of philanthropy.
We at Higher Ed Watch have applauded these investigations because we believe serious abuses may have occurred. We have also questioned whether the company deserves to maintain its nonprofit status, as its loans are as expensive, and in many cases, more expensive than its for-profit competititors. Moreover, we've also found that Loan to Learn is lending to better-risk students; that is those who tend to have higher credit scores than the population of students who are borrowing private loans from EduCap's largest for-profit rivals.
Mr. Pappas told The Chronicle that the company's decision to reduce its operations was "unrelated" to the investigations that are being undertaken. He said that the company would continue to service existing loans and will continue to make some new loans.
Two sources, however, told Higher Ed Watch on Wednesday that the company has laid off a substantial number of employees and may have to shut down altogether by the fall.