Led by Sallie Mae and the Apollo Group, the loan industry and for-profit colleges use political donations to try to get their way on Capitol Hill
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Graphic: Showing how the money flowed to and from the coffers of two congressmen
Table: Showing the Democrats and Republicans who received the most campaign contributions
Tables: Showing the top five campaign contributors among the loan industry and among for-profit colleges
Article: Lenders Pay a Steep Price to Be Noticed
Article: For-Profit Colleges Spend Big and Win Big on Capitol HillBy STEPHEN BURD
When the Republican leaders of the education committee in the U.S. House of Representatives introduced legislation in May to renew the Higher Education Act, advocates for the student-loan industry and for-profit colleges had cause to celebrate. They had received most of what they had asked for in the bill that governs federal student-aid programs.
But those victories did not come cheaply.
A Chronicle investigation reveals that over the last year and a half, officials with the loan industry and proprietary institutions have given, individually and through political-action committees, or PAC’s, almost $1-million in campaign contributions to the 49 members of the House Committee on Education and the Workforce, according to Federal Election Commission records through the end of May.
More than half of the money, about $540,000, has gone to the two Republican lawmakers in charge of drafting the higher-education legislation -- Reps. John A. Boehner of Ohio, who heads the full committee, and Howard P. (Buck) McKeon, who leads the panel’s subcommittee on higher education. Mr. Boehner received about $136,000 from lenders, and $102,000 from for-profit schools; and Mr. McKeon got about $175,000 from the loan industry, and $126,000 from proprietary institutions.
The rest of the contributions were split almost equally between Democrats and Republicans on the committee.
The student-loan industry contributed more than two-thirds of that million dollars. Sallie Mae, the nation’s largest financer of federal student loans, was the single largest donor by far, giving about $185,000. The Apollo Group, the parent company of the University of Phoenix, was the top-giving proprietary institution, donating nearly $70,000.
These donations arrived at a pivotal time. In debating legislation to extend, or reauthorize, the Higher Education Act, Congress is preparing to set federal higher-education policy for much of the next decade. (Donations to the Senate’s Committee on Health, Education, Labor, and Pensions were not included in this analysis because that panel has yet to produce a reauthorization bill.)
The student-loan industry and for-profit colleges have much at stake in the discussions. Lobbyists for proprietary institutions, for example, are pushing lawmakers to relax certain rules that institutions must follow to participate in the student-aid programs. Congress wrote those provisions into the law in the early 1990s to crack down on fly-by-night trade schools that had been set up to bilk aid dollars from the government.
Meanwhile, loan-industry officials have been pressing Congress to make a significant change to the federal loan-consolidation program, which allows borrowers to combine and refinance their federal student loans. If the industry gets its way, borrowers who seek such consolidation loans would no longer be able to lock in a low, fixed interest rate for up to 30 years, as they are able to now.
Lenders, like Sallie Mae and Citibank, which have lost a growing share of the market to new companies that specialize in refinancing, have pushed for a shift to variable rates for several years, to make the loan-consolidation program less attractive to borrowers. (Officials from loan-consolidation companies have contributed about $104,000 to members of the committee to counter the lenders’ efforts, with 87 percent of the funds going to the panel’s Republican members. That money was not counted in the $1-million total.)
Representatives Boehner and McKeon included the changes sought by proprietary institutions, Sallie Mae, and other lenders in their bill (HR 4283), which is not expected to be voted on before next year. But the lawmakers say that their fund raising does not affect their decision making. In fact, they point out, their bill would go after “excess earnings” that lenders make on student loans.
“If the Republican bill had been crafted on the basis of financial contributions, it would not include provisions requiring lenders to give back billions of dollars in excess profits, or eliminating excess lender subsidies,” Representative Boehner, the panel’s chairman, said in an e-mail message to the Chronicle.
Most loan-industry officials, however, have signed off on those changes in exchange for getting what they want. In a prepared statement the Consumer Bankers Association, which represents most of the major banks in the student-loan program, hailed the bill in May as “strong and balanced.”
Opponents of the legislation say that it has been hijacked by special interests. “Big money has helped to set the agenda for this reauthor-ization,” says Luke Swarthout, a higher-education adviser for the State Public Interest Research Groups.
Beyond the relative merits of the reauthorization legislation, some who have long been involved in making higher-education policy worry that the growing infusion of dollars into the campaign coffers of members of Congress has tainted the political process.
“Policy doesn’t count anymore,” says Thomas R. Wolanin, a former Democratic Congressional aide who helped manage three previous renewals of the Higher Education Act. “It’s all about politics and power, and who gets money, and not about broad discussions of public policy. And Democrats are not much better than Republicans on this score.”
‘Explosion’ in Giving
By almost every measure, the dollars flowing to the lawmakers in charge of higher-education policy have grown substantially over the last 25 years. Lobbyists and Congressional aides say that giving spikes in each reauthorization cycle, about every five or six years.
And the overall amounts substantially increase from reauthorization to reauthorization. Records from the Federal Election Commission show, for example, that lenders and for-profit colleges have given nearly four times as much money to Representatives Boehner and McKeon during this election cycle than they contributed to the leaders of the House education committee in 1997-98, the last time the higher-education law was up for renewal.
Mr. Wolanin says it is not surprising that there has been “a real explosion” in campaign donations over time by those whose livelihood depends on the student-aid programs. “The fact that the amount of giving has increased so dramatically is a function of how big the student-aid programs have gotten and the amount of dollars that are involved,” he says. “Even small changes in the law can mean major shifts in where the money goes.”
When Mr. Wolanin joined the education committee as a staff member in 1977, the federal student-loan program lent $4-billion a year to about 1.5 million students. By the time he departed Capitol Hill in 1993, the program was providing about $20-billion to nearly four million students. Today, more than six million students and their families receive about $50-billion in loans each year.
“The stakes just keep getting higher,” he says.
More Bang for the Buck
The growth in giving to members of the House education committee over the last six years can be attributed, in part, to changes in the panel’s leadership during that time.
Mr. Boehner, who has been chairman of the committee since 2001, is regarded as an expert fund raiser. In contrast, William F. Goodling, the former Republican representative from Pennsylvania who headed the panel during the last reauthorization, was less comfortable raising money, and, for the most part, did not accept contributions from PAC’s.
Changes in campaign-finance laws may also have played a role. In 2002 Congress banned “soft money,” unlimited donations that could be made to national political parties and individual candidates as long as the funds were not to be used for direct campaign expenses. It is difficult to say how much money members of the education committee received in soft-money donations in 1997-98 because those donations were not always disclosed.
The biggest difference, however, appears to be an escalation in the use of “leadership PAC’s.” Representatives and senators create these PAC’s, which are separate from their personal campaign accounts, so that they can spread money to other candidates -- especially those in tight races -- to build up their stature within their parties and loyalty within their committees.
More than one-third of the members of the House of Representatives maintain leadership PAC’s. Neither Mr. Goodling nor Mr. McKeon had them in 1998. But today almost all House committee and subcommittee chairmen have them, and Representatives Boehner and Mc-Keon are no exception.
In fact, about 80 percent of the donations that the two lawmakers collected from lenders and for-profit institutions in 2003-4 went into their leadership PAC’s.
Because lawmakers’ leadership PAC’s and personal campaign accounts are considered to be entirely separate entities, contributors need not fret if they reach the contribution limits in one account because they can give to the other, say campaign-finance experts.
In addition, people can make bigger donations to a representative’s leadership PAC than they can give to that legislator’s personal account. While individual donors can contribute up to $4,000 to a lawmaker during a two-year election cycle, they can give as much as $10,000 to that representative’s leadership PAC over the same period of time. Meanwhile, companies can use their own PAC’s to give up to $10,000 to a lawmaker’s campaign account and another $10,000 to that legislator’s leadership PAC during an election cycle.
“Deep-pocketed donors who are trying to curry favor with a lawmaker are going to max out every way they can,” says Steven Weiss, the communications director at the Center for Responsive Politics, a nonprofit research group that tracks money in politics. “Leadership PAC’s give them the opportunity to give more.”
‘A Good Earner’
Mr. McKeon has told colleagues and staff members on the education committee that he wants to be the panel’s next chairman.
Depending on the outcome of the elections this fall, he could get his chance soon. While Mr. Boehner’s term as chairman doesn’t expire until 2006, the Ohio Republican has been angling to return to a position in the House leadership, say lobbyists for the student-loan industry and for-profit colleges who are friendly with the congressman. Mr. Boehner served in the leadership from 1995 to 1998 while Newt Gingrich of Georgia was speaker of the House. But he lost his position when Mr. Gingrich resigned as speaker.
Both lawmakers have been generous with the money they have collected in their leadership PAC’s. Together, the two congressmen have contributed nearly $450,000 to their colleagues in the House, with much of it going to those GOP lawmakers who appear to be most in jeopardy of losing their seats. They have also given more than $100,000 to Republican candidates who are running for open seats or who are challenging Democratic incumbents.
Such largess, campaign-finance experts say, is often rewarded. “It definitely helps in the rise in leadership,” says Kent Cooper, a co-founder of PoliticalMoneyLine, a company that provides campaign-finance data and lobbying reports to clients. “Lawmakers earn a reputation for being of assistance when it’s needed the most. And those they help feel somewhat obligated and one day may return the favor.”
One lobbyist for a company that was a big contributor to the committee, who wanted to remain anonymous for fear of offending the congressmen, compared the process to a less savory profession. “It’s like in the mob,” the lobbyist said. “To get ahead, you have to be a good earner for your team.”
But some Congressional observers and higher-education experts say that the practice has made lawmakers even more aggressive about raising campaign cash and therefore more mindful of the needs and wishes of their contributors. And this affects policy making, they say.
“The more money that comes into the system, the greater the desire to accommodate more interests,” says David V. Evans, who spent 21 years as a Democratic Congressional aide on the Senate and House education committees. “And that makes it more difficult to make difficult decisions.”
Building a War Chest
Not everyone on the education committee cashed in. Seven members -- four Democrats and three Republicans -- did not receive any donations from lenders and for-profit institutions. In addition, another 13 representatives -- five Republicans and eight Democrats -- got $5,000 or less from those contributors.
Altogether, Democrats received about $215,000 from lenders and proprietary institutions. Reps. George Miller and Dale E. Kildee, the senior Democrats on the education committee and the panel’s subcommittee on higher education, together received $51,650.
But the top Democratic recipient of campaign cash was Rep. Robert E. Andrews of New Jersey, who raised about $41,000. More than half of that money came from proprietary institutions.
Mr. Andrews has been a longtime champion of for-profit colleges. More surprising, though, has been the support he has gained from lenders. For much of his career in Congress, Mr. Andrews has been a leading proponent of direct lending, which provides loans directly to students, eliminating the role that banks and guarantee agencies play in the federal government’s main student-loan program, and a critic of the loan industry.
Recently he has reconsidered his position. Speaking at the annual meeting of the Consumer Bankers Association in December, Mr. Andrews called the guaranteed-loan program a “resounding success” and said that he had been “incorrect” in his earlier support for replacing it with direct lending. Later that day, members of that group held a fund raiser for him.
In April Mr. Andrews introduced a bill (HR 4102) that won ovations from loan-industry officials. Under that measure he would significantly raise the limits on what students may borrow from the federal-loan programs, and he would bar most borrowers from locking in low-interest rates on consolidation loans.
In drafting his bill, the congressman bucked the panel’s Democratic leadership, which opposes moving the consolidation program to variable rates. Mr. Andrews has said that wasn’t his intention. He said his proposal, which -- unlike the change in the Republican bill -- would allow some borrowers who are overburdened with debt to get a lower interest rate, could bring together Democrats and Republicans who are looking for a compromise.
His bill has raised the suspicion among some of its opponents that Mr. Andrews is cozying up to lenders to help build up a war chest for a future run for governor in his home state. But in an interview, Mr. Andrews pointed out that the donations from the loan industry and for-profit institutions make up less than 5 percent of the money he has raised over the last two years.
“Any suggestion there is a connection between the legislation I support and who contributes to me is wrong,” he said.
Three of the panel’s other Democrats -- Reps. Carolyn McCarthy of New York, David Wu of Oregon, and Rubén Hinojosa of Texas -- have co-sponsored the New Jersey lawmaker’s bill. Together they received about $54,000 from loan industry.
Of course, not everyone who receives contributions acts accordingly. Representatives Kildee and Miller have accused the panel’s Republican leaders of putting the needs of lenders before students and of jeopardizing the integrity of the student-aid programs by proposing to relax restrictions on for-profit institutions.
Still, lobbyists for those interests say they do not regret the contributions they have made to the two lawmakers. It would be foolish, they say, to alienate the committee’s Democratic leaders.
And sometimes their efforts pay off. Last month Mr. Kildee joined Mr. Andrews in introducing legislation to eliminate the “50-percent rule.” Passed in 1992, the rule prevents institutions that enroll more than half of their students at a distance, or offer more than half of their courses via distance education, from participating in federal financial-aid programs. Getting rid of that rule has been a top concern of for-profit institutions for the last several years, though lobbyists for proprietary schools generally prefer the GOP bill, which puts fewer restrictions on them.
Above the Fray?
With all of this money going to committee members, some college leaders say it is not surprising that much of the focus of this reauthorization has been on the failures of traditional higher education, which does not make contributions to lawmakers that are anywhere close to the size of those made by banks and for-profit colleges. (The Chronicle investigation looked at contributions from employees and lobbyists of public and private colleges, but found that most came from professors who did not appear to be advocating on behalf of their institutions.)
At the very least, some college lobbyists say that they cannot get as much access to lawmakers as those who have deep pockets.
“Some of us have spent a lot of time talking with Congressional staff about integrity issues, but we’ve always got the impression that the Hill offices’ carpet had been worn threadbare by repeated visits from proprietary-school lobbyists,” says David S. Baime, vice president for government relations at the American Association of Community Colleges.
But some Congressional observers say that the colleges have only themselves to blame.
For too long, higher-education leaders have thought of themselves as above the fray, says Mr. Evans, the former Democratic aide. While individual colleges have become quite adept at employing lobbyists to win Congressional earmarks for specific projects or research on their campuses, college advocates continue to refuse to play “the political game” for the good of the entire enterprise. Mr. Evans says that higher education needs its own PAC.
“College leaders tend to think they are important because they have always been important and they have not realized that the playing field has changed and that they need to get in and scrap to get their voices heard,” he says. “They could learn a lot from proprietary institutions and the loan industry.”
THE MONEY FLOW
During the current election cycle, two key Republican lawmakers who introduced legislation in the U.S. House of Representatives to renew the Higher Education Act have received nearly $600,000 in campaign contributions from political-action committees, officials of for-profit colleges, the student-loan industry, and companies that specialize in refinancing student loans. The bulk of the money went into the legislators’ “leadership PAC’s,” rather than to the lawmakers’ personal campaign accounts. Congressmen use these PAC’s to donate to the campaigns of other candidates -- especially those in tight races -- to build up their clout within their parties. |
 | Rep. John A. Boehner of Ohio, the chairman of the House Committee on Education and the Workforce | |  | Rep. Howard P. (Buck) McKeon of California, the head of the education panel’s subcommittee on higher education | |
Loan-consolidation companies: | $35,750 | For-profit colleges: | $102,150 | Student-loan industry: | $136,270 | Total: | $274,170 | | Loan-consolidation companies: | $22,500 | For-profit colleges: | $126,230 | Student-loan industry: | $174,950 | Total: | $323,680 | |
Money to his leadership PAC, the Freedom Project: | 79 percent ($215,620) | Money to his campaign account: | 21 percent ($58,550) | | Money to his leadership PAC, the 21st Century PAC: | 80 percent ($259,780) | Money to his campaign account: | 20 percent ($63,900) | |
The $215,620 equals about 20 percent of the congressman’s total leadership money from all sources. Among other things, money from the PAC went to: - Republican congressmen: $330,000 (including $57,000 to members of the House education committee)
- Republican candidates seeking open seats or challenging Democratic incumbents: $90,000
- National Republican Congressional Committee: $15,000
- President Bush’s re-election campaign: $5,000
| The $259,780 equals about 45 percent of the congressman’s total leadership money from all sources. Among other things, money from the PAC went to: - Republican congressmen: $111,000 (including $24,000 to members of the House education committee)
- Republican candidates seeking open seats or challenging Democratic incumbents: $30,000
- National Republican Congressional Committee: $14,446
- President Bush’s re-election campaign: $2,000
|
Note: Those included in “student-loan industry” are industry employees and PAC’s of most of the top-20 lenders in the federal-loan program, as determined by the U.S. Education Department, as well as Nelnet (National Education Loan Network) and the nonprofit lenders represented by the Education Finance Council. “For-profit colleges” include the PAC’s and employees of proprietary institutions and the Career College Association. “Loan-consolidation companies” include employees and PAC’s of companies that have specialized in refinancing student loans, such as the College Loan Corporation and Collegiate Funding Services. |
SOURCE: Federal Election Commission records obtained through PoliticalMoneyLine |
WHERE $1-MILLION WENT |
Republican lawmakers on the House Committee on Education and the Workforce received about three quarters of the $1-million that the panel’s members obtained in campaign contributions from proprietary institutions, lenders, and loan-consolidation companies. Most of that money, however, went to the two GOP lawmakers in charge of drafting the legislation to renew the Higher Education Act, Rep. John A. Boehner of Ohio and Rep. Howard P. (Buck) McKeon of California. The remaining dollars were almost evenly split among Democrats and Republicans on the panel. Here are the top five recipients from both parties: |
Democrats |
Robert E. Andrews (New Jersey) | $28,056 | $12,736 | $5,250 | $46,042 |
David Wu (Oregon) | $5,399 | $29,300 | $0 | $34,699 |
Dale E. Kildee (Michigan) * | $14,250 | $14,400 | $6,000 | $34,650 |
George Miller (California) ** | $3,000 | $20,000 | $1,000 | $24,000 |
Carolyn McCarthy (New York) | $5,000 | $15,250 | $0 | $20,250 |
Republicans |
Johnny Isakson (Georgia) | $11,500 | $34,150 | $0 | $45,650 |
Michael N. Castle (Delaware) | $1,000 | $23,000 | $0 | $24,000 |
| $0 | $15,500 | $6,000 | $21,500 |
Max Burns (Georgia) | $4,250 | $14,700 | $1,500 | $20,450 |
Jon Porter (Nevada) | $4,000 | $9,250 | $3,250 | $16,500 |
* Mr. Kildee is the top Democrat on the House education panel’s subcommittee on higher education. |
** Mr. Miller is the top Democrat on the House education committee. |
+ Mr. Tiberi also serves on the House Committee on Financial Services, so some of the contributions he has received from banks may be unrelated to their political interest in the federal student-loan program. |
Note: Those included in “student-loan industry” are industry employees and PAC’s of most of the top-20 lenders in the federal-loan program, as determined by the U.S. Education Department, as well as Nelnet (National Education Loan Network) and the nonprofit lenders represented by the Education Finance Council. “For-profit colleges” include the PAC’s and employees of proprietary institutions and the Career College Association. “Loan-consolidation companies” include employees and PAC’s of companies that have specialized in refinancing student loans, such as the College Loan Corporation and Collegiate Funding Services. |
SOURCE: Federal Election Commission records obtained through PoliticalMoneyLine |
THE LOAN INDUSTRY’S TOP 5 CAMPAIGN CONTRIBUTORS |
Sallie Mae | $184,220 | $128,020 | $56,200 |
Nelnet | $92,800 | $78,800 | $14,000 |
Bank One | $45,450 | $28,750 | $16,700 |
Bank of America | $44.450 | $34,700 | $9,750 |
Union Bank & Trust | $36,000 | $36,000 | $0 |
Note: Includes donations from companies’ employees and PAC’s that went to lawmakers’ personal campaign accounts and “leadership PAC’s.” |
SOURCE: Federal Election Commission records obtained through PoliticalMoneyLine |
TOP 5 CAMPAIGN CONTRIBUTORS AMONG FOR-PROFIT COLLEGES |
The Apollo Group | $68,100 | $64,100 | $4,000 |
Corinthian Colleges | $58,800 | $44,550 | $14,250 |
Career College Association | $54,855 | $35,500 | $19,355 |
Education Management Corporation | $19,600 | $15,300 | $4,300 |
Laureate Education* | $12,000 | $12,000 | $0 |
* Formerly known as Sylvan Learning Systems |
Note: Includes donations from companies’ employees and PAC’s that went to lawmakers’ personal campaign accounts and “leadership PAC’s.” |
SOURCE: Federal Election Commission records obtained through PoliticalMoneyLine |
http://chronicle.com Section: Government & Politics Volume 50, Issue 47, Page A16