Secretary Spellings Stands Up to Senator Clinton

January 10, 2008

Washington — Education Secretary Margaret Spellings is making it clear that she doesn’t share Sen. Hillary Rodham Clinton’s view that the Bush administration is too cozy with the student-loan industry.

After winning the Democratic presidential primary on Tuesday in New Hampshire, Senator Clinton complained that “predatory student-loan companies” have enjoyed “seven years of a president who stands up for them.”

Ms. Spellings, asked about that remark during an address here today at the National Press Club, said the Bush administration actually has provided “vigorous oversight when we see abuse in the financial and student-lending industry.”

The secretary cited the case of the 9.5-percent loan-subsidy program, which, according to the department’s inspector general, had a loophole through which lenders pulled hundreds of millions of dollars in excess profits. That abuse “has come to an end under this administration,” Ms. Spellings said.

She also made clear that she still has no intention of asking the loan companies to repay the money, as proposed by the inspector general. She noted that there will always be some graft in government programs and that the amount lost in the 9.5-percent program is small compared with the overall amount of federally guaranteed student lending.

“We just have to sort of think about the order of magnitude,” Ms. Spellings said. “Think about it in context.”

The secretary also said the government was working as quickly as possible to resolve the case of Matteo Fontana, the former department official who has been on paid leave since last April, when he was found to be holding stock in a student-loan company he was responsible for regulating.

“It will be dispatched as soon as possible, one way or the other,” she said of Mr. Fontana’s case. “The federal government has various policies and procedures with respect to due process for individuals who have been accused of things.” —Paul Basken