Ed Gillespie vows that if he’s elected governor of Virginia, he will make lowering the high cost of college a priority. But for years, the lobbying firm he ran, Quinn Gillespie & Associates, fought to do the exact opposite.
At a turning point for the student loan industry a decade ago, the firm pressed Congress to kill legislation aimed at lowering the cost of college. The bill aimed to take millions of dollars in subsidies that had been given to private lenders and instead use that money for grants for low-income college students and to lower education loan interest rates. Quinn Gillespie clients from the loan industry — Nelnet, Bank of America and College Loan Corp. — were trying to protect the profits they earned from financing student loans on the government’s behalf.
Though the lobbying campaign proved unsuccessful — the legislation passed — Gillespie’s critics say it raises questions about his commitment to college affordability, a key part of his platform. They also worry that the Republican’s ties to Nelnet, which now manages a portion of the federal government’s $1.3 trillion student loan portfolio, could stymie efforts to have the state regulate the company and other student loan servicers.
“He’s getting away with not having to answer about his relationship with the student loan industry and the implications for borrowers,”said Maggie Thompson, executive director of Generation Progress Action, the youth engagement arm of the Center for American Progress Action Fund. The group is running ads about Gillespie’s record on education.
Gillespie has never taken a position on having the state regulate student loan companies, and his campaign spokesman David Abrams declined to discuss the candidate’s stance on the issue. Abrams said Gillespie had no involvement in his firm’s lobbying efforts for the private student loan companies, even though his name is listed on federal disclosure forms.
“QGA, the firm Ed left more than a decade ago, had a practice of registering Ed for a majority of its clients because lobbying without registering is an offense, but registering without lobbying is not,” Abrams said, in an email.
In his campaign announcement in February, Gillespie blamed “constant tuition hikes and rampant spending” for “making college increasingly unaffordable for too many students.” The candidate promises on his campaign website to enhance affordability by increasing financial aid and work-study opportunities, and by expanding online learning, community college transfer programs, and partnerships between high schools and colleges for dual enrollment.
“Ed has a detailed plan to make college more affordable and more accessible for all Virginians,” Abrams said. “He has not lobbied since leaving QGA more than a decade ago to serve in the White House for then-president George W. Bush.”
According to federal disclosure forms, Quinn Gillespie earned about $740,000 from lobbying on student loan issues for Nelnet, College Loan Corp. and Bank of America between 2005 and 2007. That period was crucial for private lenders because the federal government had begun a re-examination of its $60 billion bank-based student loan program, with members of Congress demanding that money be redirected to help students.
At the time, private lenders used their own money to finance federal student loans, but behind the scenes, the government paid a portion of the interest to make the debt more affordable. And to entice lenders, the government guaranteed the debt, taking on the risk of default. The arrangement garnered little attention until 2006, when the Education Department inspector general caught several lenders, including Nelnet and Sallie Mae, overcharging the government by tens of millions of dollars. Once again, Quinn Gillespie stepped in to help its client, Nelnet.
A Senate report shows Quinn Gillespie lobbied the Education Department on behalf of Nelnet as the agency decided what action to take against the company for wrongfully collecting $278 million from 2003 to 2005. Nelnet disputed the findings and was allowed to keep the money.
“Ed Gillespie was Nelnet’s highest profile lobbyist while this sweetheart deal was being cut,” said Michael Dannenberg, who was a policy adviser for the late Sen. Edward M. Kennedy when the scandal broke and now works with the advocacy group Democrats for Education Reform. “At the same time, he was the chairman of the Virginia Republican party. . . . He had a public role beyond being a lobbyist. Think about what that $300 million could have done to make college a lot cheaper for students in Virginia and across the country.”
In the wake of that scandal, Democrats began calling for only the government to provide direct federal loans, a move President Barack Obama eventually made when he entered office. Still, his administration gave contracts to some former private lenders, including Nelnet, to collect and apply payments as a student loan servicer.
Some of those companies have been accused by lawmakers and consumer groups of not doing enough to help struggling borrowers. As a result, states are exercising greater oversight of servicers to hold them accountable for helping residents manage their debt. California, Connecticut and Washington, D.C., all require student loan servicers to be licensed to operate within their borders, and those governments have the power to revoke, deny or suspend permits to operate.
Virginia Democrats have pushed for a similar law in their state, but legislation stalled in committee earlier this year. Gillespie’s Democratic opponent, Ralph Northam, is urging the legislature to reconsider the issue and create a student loan bill of rights.
“My opponent has worked on behalf of student loan lenders to keep the costs of college higher in order to line his own pockets at Virginian’s expense,” Northam said, in a statement. “I want all kids to have the same opportunities that I’ve had, and as governor, I’ll work to strengthen our system of higher education to ensure its access, excellence and most of all — its affordability.”
Proponents of state-level oversight worry that Gillespie, given his history with the industry, could thwart efforts to regulate the companies. A Gillespie administration, they say, could usher in lax oversight of other stakeholders in student lending, including debt collection agencies and universities.
“There is no way we would get the consumer protections at the state level that we’re looking for” under Gillespie, said Thompson, of Generation Progress Action. “With all of the protections Education Secretary Betsy DeVos is rolling back at the national level, we see our path to regulating servicers through the states.”