Roundup: Week of October 29 - November 2

Ed Dept. Asks for Details on Lender Relationships From 55 Schools; Releases Final Regulations

The U.S. Education Department announced on Wednesday that it is stepping up its investigation of whether some colleges have violated federal law by making it virtually impossible for students to borrow federal loans with the lender of their choice. Speaking to reporters in a telephone conference call, Under Secretary Sara Martinez Tucker revealed that the Department had sent letters to 55 colleges, from a group of 921 that the agency had initially contacted, and 23 lenders with which the schools had exclusive arrangements. All of these schools, which the Department did not identify, did at least $10 million in federal loan volume and most held 95 percent of the funds going to a single letter. The letters request additional information by Nov. 30 on the relationship between the schools and lenders, though Tucker said, "We are not accusing them of anything illegal at this time."

The Department also this week issued final regulations governing the relationships between colleges and federal student loan providers. When they go into effect in July, the new rules will bar colleges from recommending fewer than three lenders to students who must borrow to pay for college, ban college officials from receiving anything more than small gifts from lenders, and provide students with clearer information about their rights under the Federal Family Education Loan (FFEL) program.

Senators Ask for Full Account of 9.5 Percent Funds

Six Democratic Senators sent a letter Thursday asking the Education Department's Inspector General to provide a complete accounting of improper billings that took place under the 9.5 percent student loan loophole. The request comes a little over a week after Education Secretary Margaret Spellings admitted to the Washington Post that the Department had no plans to conduct a full audit of how much funds had been wasted. The letter was signed by Sens. Edward M. Kennedy (MA), Barack Obama (IL), Hillary Clinton (NY), Patty Murray (WA), Byron Dorgan (ND) and Barbara Mikulski (MD). "Taxpayers also deserve information on which lenders were involved, what methods, they used to claim these subsidies unfairly, and why the Department allowed the inappropriate subsidies to be paid," the Senators wrote.

Nineteen University Systems Pledge to Halve Achievement Gaps

Nineteen public college and university systems unveiled an ambitious eight-year plan this week to halve the gaps between the rate at which white and minority and low-income students enroll in and graduate from their colleges. The plan, known as "Access to Success," is a joint effort between the National Association of System Heads, Education Trust and systems from Maryland, California State, the City University of New York, and other organizations. Combined, these 19 systems represent about 2 million students, including one-third of all minority and low-income students enrolled nationwide at public four-year institutions. While each system will come up with its own plan for halving the achievement gap, they will all release uniform data on their progress, making it easier for accountability purposes. "Well keep pressure on ourselves to pull this off. This will not be just another effort that people will have forgotten," Thomas Meredith, commissioner of higher education for the Board of Trustees of State Institutions of Higher Learning in Mississippi, told Inside Higher Ed.

Audit Uncovers Questionable Practices at Iowa Student Loan Agency

Exclusive referrals, ethics violations, and deceptive language in marketing materials were just a few of the questionable practices uncovered by a recent audit of the Iowa Student Loan Liquidity Corporation (ISL). A private non-profit guarantee agency and secondary market started by the state, ISLs revenues increased by more than 200 percent between June 2003 and June 2007, the audit found. At the same time, students in Iowa are among the most indebted in the country. An investigation of agency e-mails by the Des Moines Register uncovered that part of the reason for this debt might stem from aggressive ISL marketing aimed at "hooking" students by convincing them to take on private loans with interests rates that are significantly higher (8.63 percent) than comparable agencies in other states. The e-mails also revealed that ISL had secured exclusive private loan arrangements with 61 percent of Iowa schools. The ISL also set up College Planning Centers to provide "independent" advice to students on how best to finance their education a tactic very similar to call centers run Nelnet, ISLs neighbor to the East, based in Lincoln, Neb.