Washington, D.C. -- For Leo Kornfeld, patience is no virtue.
Nothing frustrates Mr. Kornfeld, special assistant to the Secretary of Education for direct loans, more than the grindingly slow pace at which the government works. His efforts to speed the process, however, often get him in trouble.
In 1979, during his first tour of duty in the federal government, the Bureau of Student Financial Assistance was shut down for a month after Mr. Kornfeld, its director, overspent its budget to collect overdue student loans.
Congress had given him the authority to hire employees to seek repayment from students who were defaulting on their loans in record numbers. Within weeks, he had hired 800 part-time employees -- an expense that his bosses at the Department of Health, Education, and Welfare had not budgeted for.
“They thought it would take me months,” he says, smiling proudly, “when it only took me two or three weeks.”
Mr. Kornfeld was rebuked for his “efficiency,” but his efforts paid off: Repayments came pouring in, and the default rate dropped sharply.
Now, Mr. Kornfeld’s supporters credit his take-charge approach for the Education Department’s recent success in instituting its direct-lending program in the face of intense opposition from Republicans and powerful special interests.
Direct lending, which is entering its third year, provides federal loan funds to colleges, bypassing the banks and loan-guarantee agencies that dominate the traditional guaranteed-student-loan system.
“To get a new program off the ground, like we did with direct lending, we needed somebody with Leo’s aggressive, can-do style to lead us,” says Karen Fooks, financial-aid director at the University of Florida. “One of the concerns I originally had was the long lead time it typically takes the department to do anything.
“To fulfill the Administration’s pledge, we absolutely needed someone who was willing to say, ‘Why can’t we do it?’ and who was willing to step on people’s toes to get it done. Leo was that man.”
But many of those he has battled in the past two years say Mr. Kornfeld has been on a crusade to destroy the guaranteed-loan program by any means necessary.
“He has belittled the importance of the guaranteed-loan program, he has bashed guarantee agencies, and, I believe, he’s actually undermined student loans in general,” says Brett Lief, president of the National Council of Higher Education Loan Programs, which represents guarantee agencies. “By saying so many bad things about the guaranteed-loan program -- the loan program that benefits the majority of the nation’s students -- he has alarmed a Congress that at times has appeared to want to blow things up in order to fix them.”
Mr. Kornfeld’s unpopularity extends beyond officials in the guaranteed-loan program. Within the Education Department itself he has made some powerful enemies -- and now his authority over direct lending is in jeopardy.
Education Secretary Richard W. Riley separated direct lending from most other student-aid programs in 1994 and put Mr. Kornfeld in charge of it. But now he is preparing to nudge Mr. Kornfeld aside by giving control of the program back to David A. Longanecker, Assistant Secretary for postsecondary education.
Mr. Riley is acting partly in response to a forthcoming report by the department’s Inspector General, which found that dividing the student-aid programs had caused “poor coordination and communication.” That problem was worsened, the report says, by serious differences between Mr. Kornfeld and Mr. Longanecker.
Sources also say Elizabeth Hicks, a deputy to Mr. Longanecker who will now oversee direct lending, sought the change so that she could administer it before leaving the department in the fall.
The proposed shift is being fought strenuously by many supporters of direct lending, who fear it could harm the program. They say Ms. Hicks lacks experience in dealing with large computer and financial systems like the ones in direct lending. And they fear that her planned return to Harvard University in October as financial-aid director will force direct lending to endure two leadership changes in six months, which could deter new colleges from joining the program.
Barmak Nassirian, an analyst at the American Association of State Colleges and Universities, says department officials could learn from Mr. Kornfeld’s bold style.
“What one typically sees with this group at the department is a proclivity toward paralysis by analysis,” he says. “There is much ink flowing about all kinds of policies. But once the meetings end, and all of this time and all of these resources have been spent, and all of these position papers have been written, we are left asking, ‘Has anything changed?’”
The Advisory Committee on Student Financial Assistance, which monitors the direct- and guaranteed-loan programs for Congress and has criticized Mr. Kornfeld, suggests in a report to be released this month that Mr. Kornfeld keep control of direct lending.
“I am not convinced that anyone else on the scene could have done what Leo did with direct loans: Turning it from nothing to a fully functioning program with 1,200 institutions and over $9-billion in three years,” says Brian K. Fitzgerald, the panel’s staff director.
Mr. Kornfeld knows that he is not the most well-liked official at the Education Department. “Some people say I am aggressive, others say I am obnoxious. Some people say that I am a bulldog, that I force my way on other people, and others call me a bastard.
“The best way to win a popularity contest is to be very moderate, not to stir the boat, not to make noise -- just let everything roll along, and everyone will think you’re a nice guy. But I’m not interested in convincing anybody that I am nice, because I’m not.
“What I am interested in is making the kinds of changes that will improve the management of the department and the lives of students. And when you make changes, you do not make friends.”
Mr. Kornfeld attributes his management style to his years in private industry. He has spent most of his career as an executive in a data-processing company. That experience was just what Carter Administration officials wanted to bring order out of the disarray they found in federal student-aid records.
“When I got here, records of who owed what to whom were kept on index cards in shoeboxes in a storage room at the department,” Mr. Kornfeld says.
But he did not leap at the chance to head the student-aid system. “They approached me at a time when I was working like a fool and making lots of money. I wanted to become president of the company I was working at -- that was clearly my goal. So when they made me the offer and told me what the salary was, I said, ‘Sorry, my family can’t live on that.’”
Joseph A. Califano, Secretary of Health, Education, and Welfare, then tried a new tactic -- guilt. He knew that Mr. Kornfeld had grown up in a poor family of recent European immigrants, and had become the first member of his family to go to college only because of scholarships from the U.S. Navy.
“He said, ‘How can you do this? All you’ve done is take all your life. You’ve given nothing back,’” Mr. Kornfeld recalls. “I was shocked and embarrassed to the point where when I left his office, I called my wife and said, ‘We’re going to Washington.’”
He worked with Mr. Califano for two years, until the Secretary was fired in 1979 by the Carter Administration for being too independent-minded. Mr. Kornfeld quit soon after to return to private industry.
But he came to yearn for a return to government service. So when the Clinton Administration came calling some years later, he eagerly signed up. “Maybe the first time, it took Califano to beat me into it. But by this point in my life, I felt that it was very important to do something good.”
Mr. Kornfeld quickly grew disenchanted, however, in his role as Deputy Assistant Secretary for student financial assistance. “I found that no decisions were made unless consensus was reached, unless everybody agreed.”
Dispirited, he offered his resignation. That was when, in an effort to keep Mr. Kornfeld, Mr. Riley asked him to run a newly separate direct-lending operation. He was also given oversight of the guaranteed-loan program and the processing of student-loan applications.
Mr. Kornfeld promptly came under attack from lenders and guarantee agencies -- as well as the more-impartial Advisory Committee on Student Financial Assistance. They accused him of promoting direct lending too much, and of refusing to consider improvements to help the guaranteed program compete with direct lending, such as basing the repayment of loans on borrowers’ income.
“Leo had a clear conflict of interest,” says Mr. Lief of the National Council of Higher Education Loan Programs. “He had no interest in helping us improve our program. He simply wanted to kill it.”
He and others cite a document that Mr. Kornfeld prepared for Mr. Riley, in which he argued that the department should terminate most of the 40 guarantee agencies in the loan program. In the paper, which Mr. Kornfeld says he never sent, he argued that in the transition to direct lending, fewer than 15 guarantee agencies would be needed.
Mr. Kornfeld makes no apologies. “I do not have to answer to the advisory committee,” he says. “I certainly do not have to answer to Mr. Lief and the guarantee agencies. My role is to answer to the President, and he was calling for 100-per-cent direct lending.”
Until this spring, President Clinton consistently had sought to end the guaranteed-loan program. In April, however, the Administration and Congress struck a deal on the Education Department’s 1996 budget, which called for colleges to have “free choice” to select the loan program they prefer.
Mr. Kornfeld says that with the Administration’s change of heart, he plans to work with lenders and guarantee agencies to improve the guaranteed-loan program “for the benefit of students.”
But Mr. Lief is not encouraged. “I have not seen any actions to back up his words,” he says.
The prospect of turnover atop the direct-lending program troubles student-aid officials, who vividly recall this winter’s crisis over student financial-aid applications. Because of a processing delay, thousands of high-school seniors had to pick a college without knowing how much aid to expect from the colleges they were considering.
The Education Department discovered the backlog of about 900,000 financial-aid applications in February. Officials said the delay was a fluke, brought on by contractors’ computer problems and by two government shutdowns and a series of snowstorms.
But student-aid experts say the problem emerged because authority for the processing system had shifted from Mr. Kornfeld to Ms. Hicks just as the backlog was discovered. As a result, neither official was able to resolve the problem soon enough.
“I think the system collapsed during the transition,” says Mr. Fitzgerald, staff director of the Congressional financial-aid advisory commission. “For a couple of weeks in February no one was clearly in charge, and these were the weeks when action was desperately needed to head off a crisis.”
A leadership change in direct lending could cause a similar problem, he says.
“Disruptions are predictable at times of transition,” he says, “and this transition will be worse, because so many of the administrators at the department who have run direct lending are leaving. It just raises the question: Why make this transition at all?”
