As for Catherine and Wayne Reynolds, [Mayor Daley] said, “We’re friends with them. Very close friends. … I’m very proud. I have a good working relationship with them. They’re very nice people.” – Fran Spielman, Chicago Sun-Times, 3/10/09
Mayor Daley’s trips on the EduCap plane are gaining traction. Coincidentally, when the story broke, I was reading Free Lunch, David Cay Johnston’s essential jeremiad about how tax policy benefits the rich, in which he discusses EduCap. They are not as nice as Daley would have you believe (pp. 154-155):
“Another big beneficiary of the government’s policy of requiring most students to borrow money to get an education and then shielding the lenders from risk is Catherine B. Reynolds, the head of a nonprofit foundation in McLean, Virginia, bearing her name. Despite its legal status as a nonprofit, the Reynolds Foundation does business as EduCap and refers to itself as a company. It pays like one, too. Reynolds makes a million dollars a year from the foundation even though it has assets of only about $200 million. Her salary is many times what the executives of charitable foundations of that size typically make.
“Her job comes with an unusual perk. This perk must be disclosed, but the foundation-cum-company did its best to obscure the perk, which it described this way: ‘Based on the recommendation of an independent security review, the corporation has implemented certain security measures including security-related services for officers and directors. The value of any services provided for any incidental personal use is treated as a fringe benefit to the recipient.’
“Could anyone reading that tell that the charity had bought a $30 million Gulfstream jet that Reynolds uses as her personal taxi?
“EduCap can afford that perk and the big pay because of its skill at steering student applicants away from the lowest-cost aid and toward its expensive loans. EduCap hands out brochures that imply that it is hard to get government-backed low-interest loans, that they have inflexible payment terms and are too small to be of much help, none of which is true. The brochure instead touts what it claims are the benefits of its loans, including the false claim that they are more flexible, while ignoring the higher interest rates, the fact that these rates can be raised without warning, and the prospect of huge fees and costs.”
CBS News has a good short report on the EduCap jet and its passengers; the map of Daley’s flights is quite dramatic. The Washington Post‘s 2007 report on the non-profit details how its associated charities have shifted money to Wayne Reynolds’s private company, and donated $400,000 to a private school the couple’s kid attended. Here’s a good breakdown of why private loans can be so expensive. Hint: they’re not fixed-rate.