Student Loan Foundation Accused of ‘Disgraceful’ Mismanagement

Published 18 March 09 05:01 PM | Student Loan Girl

All six governor-appointed board members of the Connecticut Student Loan Foundation were dismissed by Connecticut Gov. Jodi Rell March 12 after a recent state audit found that the student loan agency had severely mismanaged its funds.

“Whether through mismanagement or misfeasance or a combination of both, while the Foundation was driving its finances into the ground it was also paying its executives huge raises and bonuses and providing them with perks and privileges fit for kings and queens,” Gov. Rell said in a press release (“Governor Rell Reconstitutes Connecticut Student Loan Foundation Board, Orders Sweeping Changes,” March 13, 2009).

The student loan foundation has lost $24.5 million over the past five years, state auditors found, and its deteriorating finances have led to the elimination of 66 positions and a foreclosure lawsuit on its headquarters.

But despite its precarious financial situation, auditors said, the foundation continued to spend excessively on large raises and bonuses for top executives, costly golf club memberships, and lavish holiday parties. The company also spent money on limousine rentals, tickets to sporting events, and a satellite car radio system for the foundation’s president, Mark Valenti.

In their report, auditors said the student loan agency incurred expenses “that appear to be far more for the benefit of those in management than for the operation of the foundation.”

Valenti has challenged the auditors’ findings, saying in a letter to the governor that auditors’ lack of understanding about the foundation’s business model led them to construct a “misleading picture” of the foundation (“‘Holy Mackerel’ is One Lawmaker’s Response to Student Loan Foundation Chief’s Employment Contract,” Journal Inquirer, March 13, 2009).

In a letter Gov. Rell sent to Michael Meotti, the commissioner of the state’s Department of Higher Education, Rell said she is taking immediate corrective actions to address the mismanagement outlined by auditors and has appointed six new board members to the foundation, including a new chairman of the board.