Weekly Roundup: Week of March 9 – March 13

Republican Lawmakers Spar with Education Secretary Over Pell Grants

Sallie Mae Says No to Plus Loan Auction

Nevada AG Warns Students to Avoid Unlicensed Trade Schools

Republican Lawmakers Spar with Education Secretary Over Pell Grants

At a U.S. House of Representatives Budget Committee hearing on Thursday, Republican lawmakers took aim at President Obama’s proposal to make the Pell Grant program into a true entitlement for low-income students by financing it entirely through mandatory spending. Rep. Paul Ryan of Wisconsin, the budget committee’s top Republican, said he was disappointed with the President’s plan “to move this program to the mandatory side of the ledger” at a time when the costs of other federal entitlement programs, like Medicare and Social Security, are spiraling out of control. “We should be reforming existing entitlements, not adding new ones to the mix,” he stated. Education Secretary Arne Duncan, who testified at the hearing, defended the plan, saying that it would turn the program into “a more reliable” source of funding for low-income students wishing to pursue a higher education. “For the first time ever, Pell Grants will not be subject to the politics of the moment or the whims of the market,” Duncan said. “They will be a commitment that Congress is required to uphold each and every year.”

Sallie Mae Says No to Plus Loan Auction

Sallie Mae, the country’s largest student loan provider, announced in a letter to colleges this week that it will not participate in the U.S. Department of Education’s upcoming PLUS Loan Auction, which would use market forces to set student loan subsidy rates for lenders making federal PLUS loans to parents. The loan company’s decision comes a week after the U.S. Department of Education signaled its intention to move forward with the auction, despite the continued downturn in the economy and the student loan industry’s opposition to the program. Sallie Mae said that taking part in the auction would not be profitable for the company, which currently controls about 40 percent of the PLUS Loan market. The loan giant appears to be confident that other lenders will sit out the auction as well — noting in its letter that if the auction collapses, the current system would stay in place.

Nevada AG Warns Students to Avoid Unlicensed Trade Schools

The State Attorney General’s Office in Nevada issued a press release this week warning students to avoid unlicensed and unaccredited trade schools that do not participate in the federal student aid programs. “History often repeats itself, and this decade is no different when it comes to student loan scams facilitated by private student lenders willing to partner with largely unregulated vocational, trade, and technical schools,” the news release states. “Unfortunately the end result often leaves the student borrower on the hook for costly student loans and, too frequently, with little or no education or training to show for it.” The AG’s office likened these scams to “a Ponzi scheme” with the schools’ survival depending entirely on their ability to lure in students, often predicated on false premises. The Nevada AG has been investigating the collapse of Silver State Helicopters, a for-profit chain that shut down unexpectedly on Super Bowl Sunday last year. As we reported this week, the FBI and a group of state attorneys general are investigating the exclusive lending arrangements that KeyBank had with Silver State and TAB Express, a defunct flight school in northern Florida.

Briefly Noted…

• Congress completes action on omnibus spending bill for the 2009 fiscal year that increases spending on Pell Grants, GEAR UP, and the TRIO programs for disadvantaged students.
• Federal Reserve issues proposals to improve consumer disclosures on private student loans, as required under last year’s Higher Education Act reauthorization legislation.
• Connecticut nonprofit student loan agency under fire for “questionable expenses.”