Congressman seeks probe of nonprofit loan providers

U.S. Rep. George Miller, a California Democrat, has asked the research arm of Congress to investigate whether nonprofit student-loan providers are abusing their tax status.
Miller, who leads the House Education and Labor Committee, requested an investigation by the Government Accountability Office, according to a statement issued last week in Washington. Miller’s action follows a July 16 report in the Washington Post on spending by EduCap Inc., a nonprofit lender.
Inquiries by Miller, U.S. Sen. Edward Kennedy, New York Attorney General Andrew Cuomo and other officials this year have uncovered influence peddling in the $85 billion-a-year student- loan industry, including undisclosed payments from lenders to schools and their employees. Nonprofit loan providers have advantages including an exemption from paying federal income tax on the interest earned on loans, Miller said.
“Nonprofit lenders exist to help students pay for college,” Miller said in the statement. “When they stray from that mission, they shouldn’t enjoy any special benefits.”
Miller’s request will be reviewed by senior GAO managers, who will determine whether to conduct an investigation, said Laura Kopelson, a spokeswoman for the agency in Washington.
EduCap purchased a $30 million Gulfstream jet, gave CEO Catherine B. Reynolds $1 million in annual pay and donated money to charities and schools linked to its executives and their families, the Post reported. The Internal Revenue Service has been reviewing EduCap’s finances, the newspaper said.
The organization, based in McLean, Va., has 501(c)(3) status under the U.S. tax code, according to Philanthropic Research Inc., known as GuideStar.
EduCap has helped 350,000 students finance their educations since the late 1980s, George Pappas, a senior vice president of EduCap’s Loan to Learn program, said in an e-mail.
“As a good and proper nonprofit, we bring more competition and choice to students and their families every day,” he said. •