Feb. 3, 2009
After more than a year-and-a-half out of the limelight, Catherine Reynolds' nonprofit company EduCap -- which used to market high-interest private student loans under the brand name Loan to Learn -- is back in the news. The Senate Finance Committee is reportedly expected to soon release findings from an investigation it has been conducting into allegations that the company has abused its tax-exempt status. In addition, former Democratic Senate leader Tom Daschle's nomination to be the next Secretary of Health and Human Services ran into trouble in part because of concerns raised about two free trips he took on the company's corporate jet.
At Higher Ed Watch, we don't quite know what to make of the accusations against Daschle, who withdrew his nomination on Tuesday. But we do know a thing or two about EduCap.
From the start of the blog in September 2006, we have focused much attention on Catherine Reynolds' private student loan company. Our earliest posts looked at how the company, through its marketing material, was pushing financially needy students to borrow private loans rather than take out lower-cost federal loans. We also exposed efforts by Reynolds to woo financial aid administrators and promote her private loan product by inviting them to participate in a four day, all-expense-paid trip to the Caribbean West Indies. The story was picked up by the national media and the trade press, and within three days of its initial publication, the company canceled the trip.
In the summer of 2007, we ran a series of stories questioning the company's tax-exempt status, considering that it did not seem to provide any benefits to students that were superior to those they could receive from for-profit lenders in the private student loan market. In fact, we found that the private loans it marketed were as expensive, and in many cases, even more expensive than those of its for-profit competitors. We also found that the company was lending to better-risk students -- that is those who tend to have higher credit scores than the population of students who borrowed private loans from its largest for-profit rivals.
We also fleshed out allegations -- first made by The Washington Post -- that Reynolds had used much of the revenue that the tax-exempt company earned off of the backs of borrowers to raise her stature in the world of philanthropy and to hobnob with the rich and the famous. And finally, we shared complaints Loan to Learn borrowers sent to us about their experiences with the company, and comments we received from former EduCap employees confirming the validity of these complaints.
At Higher Ed Watch, we applaud the Senate Finance Committee for investigating EduCap's alleged abuses and eagerly await the panel's findings.