Republicans Get Desperate to Save Bank Subsidies
July 30, 2009 - 12:02am ET
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They must be desperate. Unhappy with the Obama plan to end subsidies for student loan lenders, Republicans look to mar the benefits gained by the plan. Touting findings by an unofficial CBO estimate, Republicans look to use it as ammunition to kill the historic Student Aid and Fiscal Responsibility Act. But with a closer look, their arguments receive a failing grade.
The official CBO estimate placed the savings gained by ending bank subsidies with a move to the federal direct lending program at close to $90 billion. Republicans though are promoting their alternative CBO estimate –which they requested—showing the bill saves substantially less. However, this new figure relies heavily on future “market risk”, that even the Director of the CBO states is not reliable:
“The approach does raise some concerns. As the recent financial turmoil has shown, risky assets, including student loans, can fluctuate wildly in value. Those fluctuations can lead to large changes in market-based estimates of subsidy rates for student loans from one year to the next.”
Rep. George Miller (D-CA) –author of the bill – rightly blasted Republicans for their deceptive tactics:
“It’s clear that Republicans didn’t like the truth – that our legislation generates almost $90 billion that could be used to help students, families, and taxpayers – so they shamelessly decided to have a little fun with the numbers…This is nothing more than a desperate attempt to confuse the public”
Meanwhile, top Republican Sen. John Kline (MN) on the House Education and Labor Committee responded to the alternative finding, “This analysis from the Congressional Budget Office confirms once and for all that these savings are a myth. A government takeover of our student loan programs is just a budgetary gimmick designed to finance the latest entitlement spending spree, leaving our children and grandchildren to pick up the tab.”
Funny enough, Kline fails to mention even the CBO estimate he supports, finds the government will save tens of billions by ending subsidies. And of course he ignores that the current bill will both boost student aid, while $10 billion is set aside to pay down the deficit – setting future generations on the right track.
Meanwhile, the President of the Consumer Bankers Association expressed, "The bill would eliminate the consumer choice that has produced lower cost loans, better service, innovation and effective default prevention programs…Students and parents would no longer have a choice of lenders, a right they've had since 1965.”
The private student loan industry sure was innovative…with schemes. The subsidy program had its share of corruption. From major lenders such as Sallie Mae and Citibank in agreement with numerous universities to peddle their loans upon students and share revenues, to the College Board providing discounts to colleges who placed them on preferred lender lists. All together, these tricks harmed student choice and discredited the very education institutions that students and parents came to trust.
The Student Aid and Fiscal Responsibility Act is a historic bill that ends private lender subsidies and reinvests in higher education. Although the bill will likely not be voted on until the fall, the battle is heating up. As students head back to school, and Congress to the Hill, will representatives stand with students or banks? Republicans surely have made that decision already...you can bank on it.
See my blog detailing the Student Aid and Fiscal Responsibility Act here.
Show your support for the bill here.
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