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PHEAA's Extravagance Exposed

Published:  March 28, 2007

A night in a luxurious hotel room ($697.52). Spa therapeutic services ($225.20). A limousine ride ($132.25). Falconry lessons ($175). Sound like an extravagant weekend get-away? It wasand all on the taxpayer's dime.

The Pennsylvania Higher Education Assistance Agency (PHEAA) finally released its expense records last week in response to an open records request by three news organizations. If anyone was wondering why PHEAA fought the release of the records for 19 months in court, heres your answer: PHEAAs board spent more than $860,000 at eight high-priced resorts for retreats held between 2000 and 2005.

PHEAA is a state agency funded with public money via America's Federal Family Education Loan program. PHEAA's mission is to "create affordable access to higher education for students and their families." How? By "developing innovative ways to ease the financial burdens of students and borrowers."

Spending $583 on a cooking lesson for board members wives isnt going to achieve that goal. Or $665 for cigars. Or $115 for a pedicure and a facial.

A PHEAA spokesman defended the expenses as contributing to the agencys bottom line, as the retreats generated revenue from financial institutions and business partners who attended. Its hard to believe there cant be a less expensive way to develop client relations. Do they really need to go to the posh Greenbrier resort in West Virginia, which boasts three championship golf courses and a 40,000 square foot spa? $860,000 could provide typical Pennsylvania State Grants (a program administered by PHEAA) to almost 250 students with incomes under $25,000 who attend four year public colleges. 250 students! Almost 140 kids could go to Penn State tuition free for $860,000.

In response to all of the negative press, PHEAAs moved quickly to control the political damage with a new travel expense policy, approved unanimously by PHEAA's board last Thursday. It includes a list of specific items that PHEAA will not reimburse (excess baggage, airline upgrades, clothing, limousine rides) and requires that the board take per-diem business travel reimbursements set by the Internal Revenue Service. The crowning touch is vague language stating that entertainment expenses for clients should "not be excessive or extravagant."

While all of this talk is great, well withhold judgment until we see the policy in action. Governor Ed Rendell will certainly be watching its implementationhes issued some biting criticism in the past week, including calls for "a culture change" and a "shaking out from top to bottom" at PHEAA. Rendell is considering pursuing legislation that would require full disclosure and transparency at PHEAAa good first step, but what about shaking out some of the agencys very well-compensated leadership?

Most disturbing about this story is that this type of extravagant spending at student loan agencies is most certainly not an isolated incident. And PHEAA made sure that everyone was aware of this fact. In the aftermath of the records release, they consistently argued that such spending was necessary in order to compete with other agencies. The most telling quote came from Keith New, a PHEAA spokesman, as he tried to justify the expenses: "[The retreats] were patterned on those of our competitors and market peers."

Excessive spending has now become an industry standard. And thats excessive spending on executive entertainmentnot on increased student financial aid. Taxpayers are supporting huge profit margins at loan companies, and executives, not students, are reaping the benefits. If that doesnt point to a broken system, what will?

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