Republicans criticize Democrats' plan to overhaul student lending
Wednesday, March 17, 2010
Republicans assailed a proposed overhaul of student lending Tuesday as a "government takeover," a "job killer" and an "outrage," seeking to rally opposition to a Democratic measure that would cut private lenders out of the federal loan market.
The measure is expected to be merged this week with a health-care bill and could come to a vote in the House by Saturday. It would end a student loan program begun in 1965 in which private lenders receive a government guarantee of repayment if borrowers default.
At the same time, the proposal would expand a government lending program. Direct lending would become the only option for federal student loans on July 1, a shift that the nonpartisan Congressional Budget Office estimates would net the Treasury $62 billion through 2020. Most of the savings would be channeled into Pell grants for needy college students.
Sen. Lamar Alexander (R-Tenn.) said student borrowers would receive worse service if the government monopolizes the business. "That'll make getting a student loan about as pleasant as standing in line to get your driver's license," he said.
Rep. Howard P. "Buck" McKeon (R-Calif.) said the proposal would eliminate 30,000 loan industry jobs. "It boggles my mind," McKeon said.
Democrats and the Obama administration said that the guaranteed loan program amounts to a giveaway to banks that could be better spent on students. The two parties have been at odds over the issue since direct lending began in the early 1990s, but the debate appears to be coming to a head.
Many colleges have been switching to direct lending in recent months or preparing to do so in case the Democratic proposal becomes law. Last year, the guaranteed lending program accounted for 69 percent of the dollar amount of new federal loans, the CBO estimates. This year, that share is expected to fall to 55 percent.