Guaranty Agency Exec Pay: A Good Deal for Taxpayers?

On May 21, René Drouin, the president and chief executive officer of the New Hampshire Higher Education Assistance Foundation (NHHEAF) Network Organizations, appeared before the House of Representatives Committee on Education and Labor to discuss reforms to the federal student aid programs. Drouin and the New Hampshire guaranty agency received heaps of praise from Representatives, who lauded them for fulfilling their charitable mission by establishing an educational foundation and providing a college planning center for Granite State students.

But no mention was given to the other ways guaranty agencies like NHHEAF spend their taxpayer subsidies, including how much they compensate top officials. Curious, we looked up the New Hampshire agency's latest 990 tax form and found that Drouin had earned a salary in 2007 of $550,072, an amount that seemed high to us considering the agency's size. So we decided to dig further and see how Drouin's compensation compared to the leaders of the 34 other guaranty agencies. Using Guidestar, a repository of nonprofit tax filings, and assorted state and newspaper databases, we found compensation information for the highest paid employee at every agency except the Oklahoma Guaranteed Student Loan Program. That information is presented in the table below.

Through this analysis, we found that Drouin's salary was the fourth highest among all guaranty agency top-paid officials, despite the fact that New Hampshire agency guaranteed the fifth smallest amount of loans in 2008. Drouin's compensation does, however, fall well below that of Richard Boyle, the CEO, president, director, and foundation president of the Educational Credit Management Corporation (ECMC) Group, the designated guaranty agency for Virginia and Oregon, and its affiliated foundations. Boyle earned an incredible $928,892 in 2007, according to tax filings. That figure put him well above the leaders of United Student Aid Funds ($715,046 in 2006) and Great Lakes Higher Education Guaranty Corporation ($635,751 in 2006), which came in second and third in our rankings.

All told, our research found that guaranty agencies' highest-paid employees earned an average of $259,633 in 2007. This breakdown, however, disguises the large discrepancies between salaries earned at the 21 agencies that are part of a state government ($158,853 on average), and those of the 13 guarantors that are private nonprofit entities ($422,431).

So why does Drouin, who runs one of the smallest guaranty agencies, earn such a high salary? Officials with the New Hampshire agency said Drouin's compensation is appropriate, considering that he has spent more than 30 years in senior positions at the agency.

They also say that his salary reflects the fact that he not only runs the guaranty agency, but also its affiliated lender and educational foundation. The loan agency was the 33rd largest FFEL lender in the 2007 fiscal year, while the foundation disbursed roughly $360,365 in charitable funds in 2007 for loan forgiveness, scholarships, and other purposes. (The organization's 2007 annual report lists a slightly different figure of $324,504.[1] See the footnote for a more detailed explanation of NHHEAF's total charitable contributions.)

Our analysis, however, shows the average earnings for officials at similarly bundled guaranty agencies and lenders was $238,668, lower than the overall average for all guarantors.

NHHEAF is certainly not the only small guaranty agency that pays its top officials generously. The New Mexico guaranty agency is the sixth smallest agency, but had the seventh highest salary at $374,877 in 2006. Also worth noting is the Connecticut Student Loan Foundation (CSLF), which had the 10th highest top-paid guaranty agency official. Not only is CSLF the smallest guaranty agency, but its leaders have come under fire lately for their extravagant spending at a time when the agency is facing huge budget deficits.

There are guarantors that provide substantially lower compensation or salary packages to their leaders. The Michigan guaranty agency, for example, spent just $105,728 on is director in 2007, followed closely by Iowa's executive director ($106,399 in 2008) and Montana's director ($107,656 in 2008).[2] Not surprisingly, all three of these agencies are part of their home state governments. In fact, the Pennsylvania Higher Education Assistance Authority was the only state-affiliated guaranty agency to have its highest salaried official fall in the top 10.

Some may argue that compensation figures are irrelevant to substantive policy discussions about federal student aid reforms. But given that decisions about the future of the federal student loan programs is going to come down to cost differences, it's important to remember how subsidies paid to lenders and guaranty agencies are used.

Higher Ed Watch left a message with ECMC and will include updates to this post with any information we receive from that agency.

[1] Payne also notes that in addition to direct charitable activities from its foundation, the organization provided $700,000 for its college outreach and access activities in 2007, which are counted as operational expenses. In addition, the organization spent $4.3 million on borrowers benefits, though lenders are often are forced by competitive pressures to offer borrower benefits to win business, and are thus not quite the same as forgiving loans or extending scholarships to students. NHHEAF provides both of these activities, but at lower funding levels than borrower benefits.

[2] The figures for Kentucky and Florida are the lowest two agencies according to our research. In the former case, however, we believe that compensation figure is so low due to the fact that the Kentucky guaranty agency shares significant operations with the state's nonprofit lender, and thus does not reflect the full compensation for guaranty agency activities. Florida, meanwhile, appears to have switched directors during the year used for payroll determination. As a result, it does not represent full annual compensation.