GAO to Investigate EduCap

It doesn't take a whole bunch of those 50 thousand dollar loans at 18 percent to poor kids to pay that million-dollar salary of CEO, Catherine B. Reynolds. It's about time the "non-profit" loan sharks at EduCap are having a little light aimed under their rock:

The chairman of the House education committee called yesterday for an investigation into whether nonprofit student loan companies are abusing their tax-exempt status.

"Nonprofit student lenders enjoy special benefits, such as exemption from federal income taxes," Rep. George Miller (D-Calif.) said in a statement. "In exchange, they must honor their charitable mission, which is to help financially strapped students pay for college. When they stray from that mission, they shouldn't enjoy any special benefits."

The focus on the nation's 35 or so nonprofit lenders comes amid a nationwide probe this year of the $85 billion-a-year student loan industry, which has revealed conflict-of-interest scandals involving lenders and university financial aid offices. The Senate began debate yesterday on legislation to overhaul the federal student loan system and limit those ties.

Miller asked the Government Accountability Office to conduct the investigation, citing a story in The Washington Post this week about one nonprofit lender.

The story focused on EduCap of McLean, a pioneer in the student loan industry, which bought an airplane worth about $30 million. It has also paid its chairman, Catherine B. Reynolds, $1 million in annual compensation and donated millions to her favorites charities, including $400,000 to her daughter's private school.

George C. Pappas, EduCap's senior vice president for strategic partnerships, said the company complies with the law and helps students.

"Tax-exempt organizations are one of many ways the federal government has brought more capital into the student loan market to help students pay for their educations," he wrote in an e-mail. "Like many other tax-exempt student loan organizations, we work to support that goal. As a good and proper nonprofit, we bring more competition and choice to students and their families everyday."

Miller also asked the Government Accountability Office to investigate whether nonprofit lenders are involved in deceptive marketing practices, noting that they are not subject to the same oversight as for-profit banks and loan companies.