Sunday, September 14, 2008

Governor Schwarzenegger ousts student-aid chairman after EdFund flap

Gov. Arnold Schwarzenegger on Friday kicked Peter Hankwitz off the California Student Aid Commission, apparently punishing the board's chairman for last week's failed attempt to take over the nonprofit agency that administers student loans.

The decision came a week after state Finance Director Mike Genest said he was overturning the commission's Sept. 4 vote to remove the board of EdFund, one of the nation's largest student-loan providers. Genest had asked the commission to postpone action against EdFund until state auditors could complete an investigation of the organization.

Hankwitz, a Northridge resident appointed in January, had criticized the agency for bureaucratic waste and for lucrative severance packages granted to EdFund executives.

He had worried that EdFund's actions could eventually harm the commission, which formed EdFund in 1997 but has gradually ceded control of the organization to EdFund's own board.

"The commission has all of the responsibility and liability of EdFund's actions, but none of the authority," Hankwitz said before last week's meeting.

In a short letter to the Senate, Schwarzenegger withdrew Hankwitz's nomination. Legislators have up to a year to confirm appointees.

The commission's vice chairwoman, Lorena Hernandez, took over leadership of the board. Neither she nor Hankwitz could be reached Friday.

The governor's decision was the latest volley in an escalating battle over how to Advertisementhandle EdFund, which Schwarzenegger proposed selling this year before backing off because of the failing credit market. An EdFund spokeswoman could not be reached Friday, but that organization's vice chairwoman said this week that the Student Aid Commission's criticism would not affect student borrowers.

"I want to reassure you that these matters are neither operational issues nor issues that involve the delivery of services to students and schools," board member Carlene Moore Ellis wrote in an open letter.

The nonprofit corporation manages nearly $30 billion in loans to students around the country. About half of EdFund's business is in other states.

  • CRTC modifies decision on telecoms consumer agency
  • Yahoo fires back at Icahn
  • DVC’s grade-change response criticized
  • Democratic leaders accused of pressuring supporters of redistricting measure