Secretary Spellings’ Prepared Testimony Before the House Committee on Education and Labor

U.S. Secretary of Education Margaret Spellings testified today before the U.S. House of Representatives Committee on Education and Labor. Following is her prepared testimony:

Thank you, Mr. Chairman. I appreciate this opportunity to set the record straight on my department’s oversight of college student aid and the Reading First program.

Federal student aid is crying out for reform. The system is redundant, it’s Byzantine, and it’s broken. In fact, it’s often more difficult for students to get aid than it is for bad actors to game the system. For example, throughout the 1990s, millions of dollars meant to help families foot the bill for college were subject to waste, fraud, and abuse.

Since President Bush took office, we’ve worked hard to clean up this system. Today, the majority of schools and lenders are doing the right thing. But when the public’s trust is violated, my department has and will act.

For example, since last August, I have been working to address urgent issues like preferred lender lists and inducements... through the rulemaking process that you set up by law. I invited this committee and its counterpart in the Senate to suggest people to join in this process. At that time, Mr. Chairman, you and other members of this committee sent me a letter requesting that I delay further action until Congress could act.

I appreciate the fact that yesterday, the House of Representatives took an important first step in this process. But in the absence of completed Congressional action, it’s been my duty to expedite reform. So in December, I convened representatives from student groups, institutions, and the lending community... as is required to fully represent all stakeholders. I asked them to look at ways to make the system more transparent and easier to use for millions of students and families.

When the committee failed to reach consensus last month, I immediately assembled a task force to work on key lender issues. They reported to me yesterday with recommendations to end unethical practices... put students’ needs first... and maintain trust and integrity throughout the system.

The task force recommended new plans to inject more choice, competition, and transparency into federal student aid. These plans will:

Ensure every borrower has the right to choose any lender, and
Require that if a school has a preferred lender list, it must disclose how and why lenders are chosen... it must include a minimum of 3 unaffiliated lenders... and it must not favor some students more than others.
In addition, we’ve strengthened longstanding guidance on what’s legal and what’s not with regard to inducements. This includes a ban on gifts and steps to limit deceptive marketing by lenders.

I will work to release draft regulations to be printed in the Federal Register by the end of this month. Even if and when a law is passed, I’ll have jumpstarted the regulatory process—which would ordinarily be just beginning its 18 plus month timeline.

There’s more work ahead, but I can’t do it alone. We must work together to change existing law. The opportunity to enact critical reform has come and gone since 2003, when the Higher Education Act became eligible for renewal.

Students deserve action now. But let me be clear: if we limit our efforts to lending practices, without addressing the interrelated nature of cost, financing, quality, and accessibility in higher education... we’re only treating the symptoms, instead of finding a cure.

We all know that federal student aid has failed to keep up with dramatic changes in higher education—like soaring tuition costs and a lack of transparency that makes oversight and real consumer choice more difficult. Let alone the rising demands of our knowledge economy that have caused enrollment to nearly triple over the last 25 years, while costs have increased nearly 400 percent!

That’s why shortly after becoming Secretary two years ago, I appointed a commission to make higher education more responsive to the needs of students, parents, educators and the business community.

They found that when it comes to controlling costs, we at the federal level have a role to play. Currently, there are 20 federal programs aiding students... and more than 200 federal laws governing higher education. It’s layer upon layer of complexity and inefficiency.

My department oversees federal student loans. Private loans—which have lately been the focus of so much attention—are overseen by other agencies like the FTC, the FDIC, the SEC, and the Federal Reserve. Therefore, I am convening the chairs of all relevant agencies to coordinate a government-wide endeavor to end student loan abuse... no matter where it occurs.

Mr. Chairman, I invite your committee and your colleagues in the Senate to help me lead this effort to restore faith in student financial aid.

We cannot fix this broken enterprise by cherry picking a few narrow issues to address. We must peel back the layers, increase transparency, streamline the entire system, and provide more aid for students.

Which is exactly what my department has been doing. I’ve already provided you with written testimony that describes in detail how we’ve improved management and reduced the default outstanding loan portfolio by 40 percent since 2001. More recently, I’ve tightened oversight of our student loan database and sent on-site teams to review the lender relationships of the 44 schools highlighted in recent reports.

In addition, since my commission’s report, we’ve been acting on their recommendations to increase affordability, accessibility, and accountability in higher education.

We’ve worked to streamline and increase federal aid, strengthen the accrediting process, and tell students earlier how much aid they qualify for. Earlier this year President Bush proposed the largest increase in federal Pell grants in 30 years. I’m glad the Congress has recently taken steps to accomplish that goal. And I hope we can work together in that same bipartisan spirit to execute the commission’s remaining recommendations... and reauthorize the Higher Education Act this year.

Mr. Chairman, 5 years ago with No Child Left Behind, you and I worked across party lines and committed to have every child on grade level by 2014. Today, this law is working—shining a spotlight on student achievement... and building demand for further changes... like keeping America’s teenagers from dropping out of high school.

An integral part of No Child Left Behind, the Reading First program, is the largest, most effective reading initiative in our nation’s history. The latest data shows that Reading First is producing sizable gains in fluency and comprehension for nearly two million first, second, and third graders. I am deeply concerned about the report Senator Kennedy released yesterday. My department will work with the Inspector General on this matter as we’ve done previously.

Last Fall, I put in place new leadership to oversee Reading First, and issued clearer guidance and training on implementation. I’ve sought input from states on how to improve the program and developed a new charter to strengthen peer review. And I’ve directed my General Counsel to take further steps to prevent conflicts of interest.

But together, we can and must do more. From K-12 to higher education, you and I now have an opportunity to enact meaningful new policies that make a real difference for students and families—just as we did 5 years ago.

Both No Child Left Behind and the Higher Education Act are up for renewal this year. Where these laws need changing, let’s do it. And where families need our help, let’s provide it. Together, we can enact policies that help prepare more students for college... and make sure they can afford it once they get there!

Thank you. I would be happy to answer your questions.