Risky Plan to Bail Out Non-Profit Lenders Gets Hearing

by Jason Delisle

Political Clout and the Non-Profit Lender

Kanjorski, like other Members of Congress, wants to help non-profit lenders, not for pressing policy reasons, but because of the political hold they have over Congress' home state constituencies. Many non-profits are intertwined with state governments and serve as big employers. By keeping non-profits in business -- protecting the federal subsidies these nonprofits receive through the federal loan program -- elected officials can take credit back home. But not all non-profits are using taxpayers' dollars wisely. A recent report by the Pennsylvania state auditor found that the Pennsylvania Higher Education Assistance Authority "created an elite compensation package for its executive staff that included excessive salaries and incentive payments not typical of a prudent state agency." This included salaries of close to $300,000 for both the president and CEO and over $200,000 for several executive vice presidents.

It is also important to note that non-profits gain political favor by hiring former Members of Congress. These individuals are hardly experts on the student loan industry, but have valuable Washington connections. In addition, non-profit lenders and their trade associations maintain a revolving door with the U.S. Department of Education, as well as key Congressional committees and offices. To be clear, we don't take issue with lobbying per se, or with organizations building effective lobbying staff. But lawmakers who are persuaded by such lobbying to enact policies that are not in the best interests of students and taxpayers should be called on the carpet.

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