Editorial: No more waiting

Monday, Aug. 6, 2007 | 7:08 a.m.

Federal auditors say the U.S. Education Department lacks an adequate system for detecting and punishing misconduct by lenders who take advantage of student borrowers.

In a report released last week, the Government Accountability Office, the investigating arm of Congress, said it initiated the investigation because of recent and increasing criticism from Congress, the news media and the attorneys general of several states regarding the practices of companies that lend students money for college. College and university students took out more than $85 billion in federal and private loans to pay for school last year.

In recent months, news reports and congressional inquiries have revealed that lending companies offered cash payments, trips and other gifts to schools or individual school administrators in exchange for being included on lists of preferred lenders that financial aid offices give to students seeking loans. Some school administrators even owned stock in the companies to which their schools were referring students.

Such practices are prohibited, the GAO says, yet the Education Department "has no oversight tools" to detect such practices , beyond waiting for someone to complain. Moreover, the GAO says, the Education Department hasn't issued updated guidelines for student lending practices since 1989. And the department has sanctioned only two lenders for improper practices in the past 20 years.

In addition, the GAO says that the Education Department lacks any clear protocol for dealing with companies that don't comply with the law, other than issuing cease-and-desist letters that offer no actual punishment.

Education Department officials have proposed tougher rules and enforcement to address the problem. But the earliest that those could go into effect is July 2008. And that, the GAO says, is not soon enough.

It is bad enough that the Education Department has allowed these predatory lending practices to continue and to grow - especially at a time when a U.S. college student, on average, graduates with about $20,000 in debt. But it is even more appalling that department officials are dragging their feet to take adequate steps to curtail these practices. It is long past time for the Education Department to take this issue seriously.