The head of the federal Education Department’s student loan office is stepping down amid growing criticism that the agency has been lax in overseeing the student loan industry.
Theresa Shaw is leaving her post as chief operating officer of the Federal Student Aid office, a job she has held since 2002, the department said in a statement. The office administers federal student aid programs.
Shaw’s resignation comes as the department faces tough questions about apparent conflicts of interest and the privacy of student loan applicants’ information. A computer database that contains financial information about students recently was put off limits to lenders out of concerns the lenders were mining it for marketing data.
The statement said Shaw told Education Secretary Margaret Spellings in February that she planned to leave the department, but not until June 1.
Shaw previously worked at student loan giant Sallie Mae, also known as SLM Corp. Critics in Congress and student advocates have complained that the department has too many people with ties to the student loan industry in charge of overseeing that industry.
Shaw headed the office where student loan official Matteo Fontana worked until it was disclosed by the Higher Ed Watch blog that he had at least $100,000 in stock in a student loan company, an apparent conflict of interest. Like Shaw, Fontana previously worked at Sallie Mae.
The disclosure about Fontana’s stock came a month after former Deputy Secretary of Education Eugene Hickok acknowledged he didn’t sell stock he was supposed to sell while on the job and agreed to pay the government $50,000 as part of a settlement.
Spellings recently said two lawyers would now examine financial disclosure forms filed by department officials.
In response to questions from congressional Democrats, the department’s inspector general, John Higgens, said he would look into possible conflicts of interest involving department employees and lenders.
New York Attorney General Andrew Cuomo has been leading an investigation into the $85 billion student loan industry.
Cuomo says the inquiry has turned up evidence that some colleges received a percentage of loan proceeds, which Cuomo calls kickbacks, from lenders given preferred status by the schools. Cuomo also said some college loan officers received gifts from lenders in exchange for steering students to the lenders.
In April, the University of Texas (UT) put its financial officer, Lawrence Burt, on paid leave and the University of Southern California (USC) did the same with its financial aid officer, Catherine Thomas. Columbia University already had placed its associate dean of student affairs, David Charlow, on leave while it investigates Cuomo’s claims.
The House is considering bipartisan legislation aimed at stopping some of the practices Cuomo uncovered.
Spellings testified on the issue before a House committee May 10, where lawmakers pressed her about a settlement with student lender Nelnet. The department’s inspector general found Nelnet improperly sought and received an artificially high rate of return on many of its loans. The department said earlier this year it would not try to recover the overpayments but made Nelnet promise to stop the practice.