The Nov. 9 editorial "Looking for Transport" discussed a provision that would update the index on which lender returns are based in the student loan program.
Changing the index for lender yields will not cost the federal government money. Congressional Budget Office (CBO) scoring shows that this provision will save the government $20 million by July 2003 in reduced payments to lenders. These are savings that will help pay for benefits to disabled workers.
This provision also does not affect the interest rates students pay. During last year's reauthorization of the Higher Education Act, we cut student interest rates to the lowest level in 18 years. This change is written so as not to affect those gains.
Finally, changing the index won't create a windfall for lenders. If this change had been in effect for the past 10 years, lender returns would have been slightly lower than the returns that were earned using the current Treasury bill-based index.
Changing the index for determining lender yields for the Federal Family Education Loan Program is sound policy. It will increase the efficiency and stability of the program. By basing the index on a private-sector funding mechanism, lenders can more easily borrow money from the private sector and fund more student loans.
According to the CBO, $20 million that would have gone to lenders is now going to be used to pay for health care coverage for disabled workers. In the process, we are increasing the efficiency and stability of the student loan program. Rather than being rejected, this provision should be widely supported and applauded.
U.S. Representative (R-Pa.)
U.S. Representative (D-Mo.)
The writers are, respectively, the chairman and the ranking minority member of the Committee on Education and the Workforce.