News Articles

Delaware County Daily Times, 5/08/08

Adolph pushing bill to aid PHEAA

By Alex Rose

DELAWARE COUNTY - Congress last week sent a bill to President George Bush that state Rep. Bill Adolph, R-165, of Springfield, called “a tremendous first step” in fixing the stalled student-loan program offered by the Pennsylvania Higher Education Assistance Agency.

House Resolution 653 would grant the U.S. Department of Education temporary authority to buy student loans from lenders that participate in the Federal Family Education Loan Program (FFELP).

Funded by taxpayers, PHEAA was responsible for dispersing nearly $500 million per year in student grants and subsidies before the subprime mortgage crisis.

Lenders have always been able to get cash to make new student loans by selling and trading old ones, but when the market dried up because of the mortgage crisis, so did the buyers.

PHEAA and about 60 other student loan agencies across the nation were forced to suspend their student loan programs, said Adolph, who was recently re-elected for a second year as chairman of PHEAA’s board of directors.

“When we suspended doing student loans back in March, obviously there was a slowdown in that segment of our agency,” he said. As a result, PHEAA began offering voluntary buyouts to nonunion employees nearing retirement in an attempt to help ease the financial burden.

PHEAA spokesman Keith New said employees have until Friday to request paperwork for the buyout.

There have been a couple of takers, he said, but because a 45-day consideration period is triggered once the paperwork is requested, others he knows of are waiting until Friday to take advantage of the full amount of consideration time.

There is also a seven-day “recision” period following the 45 days, said New, during which employees can essentially undo the paperwork altogether.

“I’m sure we’re going to have some people that are playing it safe,” said New. “We won’t know (the numbers) for sure until the end of June.”

Meanwhile, Adolph is hoping the bill will put liquidity back into the markets and allow the agency to begin offering loans again by the summer.

New said he expects the temporary powers vested in Education Secretary Margaret Spellings to essentially start up a second market will help get the gears of FFELP turning again, but at this point, it is unclear what the future holds.

“We’re in extraordinary times with no historical precedent and the same holds true for this legislation,” he said. “The president is expected to sign it, and we have a lot of work to do, working with the department, seeing how it’s going to work and implementing it.”

Adolph, who faces Democrat Tom Quinn in the November general election, said he began working to get something done in Washington after he sat down with the PHEAA board, financial advisors and management to go over the agency’s books.

“The figures were disastrous,” he said. “It was a well-kept secret outside of board rooms across the nation and it was during this meeting that I decided … it’s not going to work itself out.”

Adolph convened a summit in March to make lawmakers aware of the mounting crisis facing the industry and took the message to Washington, where he enlisted the help of various legislators from both sides of the aisle, including Chairman of the House Education and Labor Committee U.S. Rep. George Miller, D-Calif.

“As a result of our visit to Washington and numerous letters as follow-ups to our Pennsylvania delegates, they were able to move a piece of legislation in an unbelievably fast rate when it comes to Washington, so I’m anxiously waiting for the president’s signature,” said Adolph.

PHEAA came under fire last year after records revealed the nonprofit corporation had been lavishing extravagant bonuses on its executives and spending seemingly unjustifiable amounts of money on business trips at posh resorts.

The agency is now operating under a strict travel and business expense reimbursement policy, and all business development “retreats” have been banned.

PHEAA has also adopted a Student Loan Code of Ethics and is eliminating all “nonessential” expenditures, which New said netted $54 million in savings last year.