Editorial: Resignation is not enough

Friday, May 11, 2007 | 7:27 a.m.

J ust as Congress prepared to investigate the government's failure to keep tabs on the nation's $85 billion student loan industry, the Education Department said this week the official responsible for overseeing the student loan program will resign in June.

This news came shortly before Education Secretary Margaret Spellings testified Thursday before a House panel about reports that lenders have paid incentives to universities and school financial aid officials to drum up more loans to students.

Investigations by state university systems in New York, California and Texas have revealed that lenders sometimes paid commissions to universities based on the amounts that students borrowed. Other times, students' calls to school financial aid offices were routed directly to private lending companies without the students' knowledge.

In response to these revelations, the House on Wednesday approved legislation that would bar lending companies from giving cash, gifts or other favors to financial aid officials at colleges and universities. The measure also would require schools to disclose any financial ties to lenders.

Critics have said the questionable loan practices have flourished under the lax oversight of the Bush administration, which was apprised of such conflicts in the industry soon after Bush took office in 2001.

In fact, as noted in a Sun editorial last week, more than a dozen of the Education Department's senior officials have previously worked in the student loan industry or have landed high-paying jobs in the loan industry after leaving the agency.

It is worth pointing out that Theresa S. Shaw, the Education Department official overseeing the student loan program who announced this week she was resigning, was appointed to her post in 2002 after a 22-year career with Sallie Mae, the nation's largest lender for student loans.

Shaw's resignation should not temper Congress' continuing probe of these questionable loan practices, which existed before Shaw was hired and likely will continue unless true oversight of this program is restored.