Senate Seeks Student Loan Firm's Data

The Senate Finance Committee demanded yesterday that a Virginia-based student loan company provide documents explaining the way it operates and why it functions with not-for-profit status.

The panel sent a letter to Catherine B. Reynolds, chairman of EduCap, saying that a recent article in The Washington Post "raises serious questions" about EduCap's operations as a nonprofit organization. Nonprofit entities are exempt from federal income tax.

EduCap spokesman George C. Pappas defended the company's nonprofit status, saying it has helped bring more capital to the student loan market and helped students pay for their education. "As a good and proper nonprofit, we bring more competition and choice to students and their families every day," he wrote in an e-mail.

The July 16 article reported that EduCap pays $1 million annually to Reynolds, bought a $30 million Gulfstream jet and donates millions of dollars to a nonprofit foundation run by Reynolds's husband.

"The taxpayers and Congress need full confidence that public charity executives aren't enjoying private jet vacations on the backs of students being charged 18 percent loan interest rates," Sen. Charles E. Grassley (R-Iowa), ranking member of the committee, said in a statement.

The letter, cosigned by Grassley and panel Chairman Max Baucus (D-Mont.), said EduCap has 30 days to provide documents explaining how it sets loan rates, approves customers and spends its money. The letter also asks for copies of all correspondence with the Internal Revenue Service over the past decade.

In the article, Reynolds said that U.S. laws allow EduCap to operate as a nonprofit organization and that critics should "take it up with Congress." Grassley referred to that quote in his statement.

"Ms. Reynolds invited critics to 'take it up with Congress,' " he said. "I look forward to EduCap providing a complete response to today's questions so Congress can have an informed view of EduCap and the laws governing non-profit organizations."