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Foes of student aid bill remain

The student loan reform package that had loomed in Congress since last summer returned to life last week and cleared the House late Sunday.

The bill would eliminate the Federal Family Education Loan program, through which the government guarantees loans issued by private lenders, leaving a greatly expanded Federal Direct Student Loan program, loans directly from the government to students.

Proponents say FFEL is wasteful, and the independent Congressional Budget Office estimates its elimination would yield $61 billion in savings over the next 10 years. More than half of the savings would go toward shoring up the Pell grant program, which offers need-based federal loans to 6 million low-income students. Pell is deep in the red; without an infusion of cash, the maximun grant might be reduced to 1980s levels and a half-million students dropped from the program.

Private lenders have already been backing away from subsidized loans, partly because of the coming sea change but also because the sector has not, apparently, been very profitable of late.

But the lending industry and Republicans in Congress remain firm in opposition. Lobbying efforts have now moved to the Senate.

Opponents have argued that eliminating the loan subsidies would mean thousands of lost jobs. Proponents say there's little, if any, net loss of jobs, because private lenders would still service federally issued loans. Opponents have also warned that student lending would become another bloated federal bureaucracy, with attendant customer-service horrors.

Here are some sound bytes from both sides.

America's Student Loan Providers, representing the lending industry: "This is not the final chapter. The Senate now has the historic opportunity to pass health reform -- without eliminating thousands of jobs and critical student services. It is not too late for the Senate to adopt the alternative community proposal, which would generate billions for Pell Grants without causing massive job losses or service deterioration."

Martha Holler, spokeswoman for Sallie Mae, the leading private student lender: "The student loan provisions buried in the health care legislation intentionally eliminate private sector jobs at a time we can least afford to lose them. On behalf of the thousands of student loan originators soon to lose their jobs to a new government monopoly, we are profoundly disappointed."

U.S. Rep. George Miller (D-CA), the chairman of the House Education Committee: "Sallie Mae has a history of using scare tactics to hold on to their excessive taxpayer subsidies, bloated CEO salaries and perks, and well paid cadre of Washington lobbyists. Judging by their statements today, it is clear that Sallie Mae will continue to do or say anything in a last-ditch effort to save their sweetheart deal - billions of dollars that we think would be better spent directly helping students pay for college."

United States Student Association President Gregory Cendana: "The student aid reform legislation saves the Pell grant from massive funding reductions that would force millions of low-income students to drop out or take on multiple jobs to pay for college. Additionally, the bill invests billions of dollars in community colleges and Minority-Serving Institutions."

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By Daniel de Vise  |  March 23, 2010; 10:40 AM ET
Categories:  Access , Aid , Attainment , Finance , Public policy  | Tags: Sallie Mae, public policy, student aid  
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Comments

Sallie Mae will always cry and moan and then pretend that they're on the government's side of this. Sallie Mae is the bipolar ex girlfriend you can't get rid of.

I'm glad this finally passed. Now if they can restore bankruptcy rights to those of us that got ripped off by those losers, things would be awesome.

Posted by: miked24 | March 23, 2010 12:00 PM | Report abuse

Oh no! Profiteering opportunistic private bank lenders won't be able to work student-loan system anymore, keep students mired in perpetual debt, and use the proceeds to bribe their Republican lackeys in the House of Reps. and Senate! Oh!! The humanity!!!

Posted by: karmal64 | March 23, 2010 1:36 PM | Report abuse

curious as to why my last comment wasn't posted. I'm fairly certain I did not violate any of TOS.

Posted by: davefen | March 23, 2010 5:26 PM | Report abuse

To the other 2 people who posted to this:

Unfortunately my first comment hasn't been posted. It basically explained how the student loan system worked. I won't re-type it due to its length. However, while the hill is right about saving tax-payers money, it will unfortunately cost students more. And for the first comment, the hill will not remove the bk rule on student loans. They need that to cover their guarantees.

Posted by: davefen | March 23, 2010 5:31 PM | Report abuse

The comments to this entry are closed.

 
 
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