The company also
has close ties to New Hampshire's Sen. Judd
Gregg, a Republican who heads the committee that
oversees education issues. Two years ago, President
Bush appointed Gregg's wife, Kathleen MacLellan
Gregg, to the board of directors of the Student Loan
Marketing Association, the branch of Sallie Mae that
remains government sponsored. She receives about
$20,000 a year for being a director, according to a
congressional aide. Another board member, J. Bonnie
Newman, once served as Gregg's chief of
staff.
advertisement
Equally important, Sallie Mae has friends
inside the Bush administration (box, above). As CEO
of the Education Finance Council, an industry trade
group, William Hansen denounced the direct-loan
program in testimony before Congress. Bush later
made Hansen the No. 2 official at the Education
Department. All told, the White House installed four
officials from the lending industry--including
Hansen--to run the direct-loan program. Hansen left
the department this summer.
From the beginning,
the direct-loan program has been unpopular among
Republican conservatives, who argue that private
industry should handle the job. Soon after taking
office in January 2001, the Bush team began to
undermine direct loans. First, officials stopped
marketing the program and competing for new schools.
Then, last year, the Bush administration proposed
selling the government's direct-loan portfolio
to a private company. Critics called this a veiled
effort to kill the program. Education Department
officials deny this. "This is money we could
have invested back in the student loan
program," explains Sally Stroup, a senior
department official. For now, the idea has been
shelved.
Bush insiders also challenged a central
pillar of the direct-loan program: the notion that
it saves taxpayers money. In early 2002, Hansen
argued inside the Education Department that when
administrative expenses were included, the cost of
direct loans was much higher than official figures
indicated. As a matter of fact, he said, taxpayers
saved no money. However, government figures
don't support his claims. They show that the
FFEL plan costs the treasury far more than direct
loans, even after deducting administrative costs. In
an interview, Hansen denies attempting to kill
direct loans and says he was only trying to
strengthen the overall loan program.
The
Education Department's actions, however, caused
some colleges to second-guess the direct-loan
program. Richard Shipman, the financial aid director
at Michigan State, says that's one reason he
decided to quit it. "I don't want to be a
part of a program," he says, "that is no
longer supported by the folks that made
it."
Romancing The Schools
Private lenders certainly know how to entice
schools. Each year, the big players in the industry
mix with several thousand college officials at the
annual conference of financial aid administrators.
One year it was Las Vegas and its rollicking
casinos, another year New Orleans and Bourbon
Street.
This July, the conference was held in a
more sedate setting, Salt Lake City, but the wine
still flowed freely, and partying was the name of
the game. Key Bank, a lender based in Cleveland,
hired an ersatz Elvis, who urged school officials to
attend the bank's party at the Hard Rock Cafe.
Exclusive guests of the Access Group, a
Delaware-based nonprofit lender, were treated to a
show by the U.S. ski team at the site of the 2002
Olympic Games. Sallie Mae transformed a hotel
ballroom into a lights-and-mirrors 1970s disco. In
all, including direct conference expenses, lenders
spent hundreds of thousands of dollars to outdo one
another in the eyes of the college reps.
