Featured * :: quality education

Don’t Let Them Kill Student Loan Reform

Armand Biroonak — Thu, 11 Mar 2010 15:36:41 -0500

Something so simple, so easy: end tens of billions of dollars in bank subsidies to the private lending industry and return much of the savings back into the hand of students, with the Department of Education providing loans to students directly. A no-brainer right? Well reform may be a no-go, if six Senate Democrats have their way.

Senators Ben Nelson (D-Neb.), Bill Nelson (D-Fla.), Blanche Lincoln (D-Ark.), Tom Carper (D-Del.), Mark Warner (D-Va.), and Jim Webb (D-Va.) all have expressed concerns about student loan reform (known as the Student Aid and Fiscal Responsibility Act) and urge for alternative proposals in order to protect lenders and jobs in their states. Fair enough, job losses –especially now –are never a good thing. However, even with reform, private lenders (that employ only around 30,000) will still play a big role in servicing loans –so job losses will be minimal or even increase with greater loan volume looking down the road. Click here for more common myths about student loan reform.

And how about the concern for students too? Students cannot afford to wait any longer, they need help now. Under reform legislation, the Pell Grant maximum would increase, thus allowing thousands more students to become eligible for aid. And making college affordable could not come at a better time. The average student debt has ballooned to over $23,000. Take a look at the increase in tuition over only the past two years at state universities for those Senate Democrats that stand in the way:

Univ. of Nebraska: over 11%
Univ. of Florida: 30%
Univ. of Arkansas: 7%
Univ. of Delaware: 16%
Univ. of Virginia: 14%

So who are some members of Congress really siding with? Students? Or Banks? Help make your voice heard here and tell the Senate to finish what the House already did, and pass student loan reform NOW!

Miller Harkin Act to Save Direct Lending

Robert Borosage — Fri, 12 Mar 2010 05:42:12 -0500

______________________

With word that Six Senators were expressing opposition to putting direct lending in the budget bill reconciliation -- which only requires sixty votes to pass the Senate -- Rep George Miller, Chair of the House Education and Labor Committee, and Tom Harkin, Chair of the Senate Education Committe, got to work. Miller pointed out that adding direct lending in the bill made reconciliation more, not less likely to pass in the House -- where every vote is needed to get the health care fix done.

The House pledged to adjust its measure to insure that direct lending would save money, even after increasing funding for Pell grants and guaranteeing that Pell grants would be adjusted annually for inflation.

If this holds, it is a terrific victory for students.

New York Times Story here http://www.nytimes.com/2010/03/12/us/politics/12loans.html?hp

Miller's press release on the program below.
__________________
EDUCATION & LABOR COMMITTEE
Congressman George Miller, Chairman
________________________________________
Thursday, March 11, 2010
Press Office, 202-226-0853

Chairman Miller: Student Loan Reform Boosts Support for Health Reform Bill
Members of Black and Hispanic Caucuses Also Show Strong Support

WASHINGTON, D.C. – Including student loan reforms in a reconciliation package will help pass health insurance reform in Congress because it is a once-in-a generation opportunity to make historic investments in college students and families, instead of banks – and at no cost to taxpayers, said U.S. Rep. George Miller (D-CA), the chairman of the House education committee, at a press conference on Capitol Hill today.

Miller was joined by U.S. Senator Tom Harkin (D-IA), the chair of the Senate education committee, House Majority Whip James E. Clyburn (D-SC) and Democratic Caucus Vice Chairman Xavier Becerra (D-CA), who underscored the importance of the bill for the Congressional Black Caucus and the Congressional Hispanic Caucus, because it invests billions of dollars to help low-income and minority students pay for college and graduate.

“Senators have a clear choice here: they can either continue to send tens of billions of dollars in wasteful subsidies to banks – or they can start to invest that money directly in students,” said Miller, who is the author of the student aid bill in the House. “This choice speaks to what our priorities will be for the next generation. We have a remarkable opportunity to change Washington and do the right thing, the fair thing, and the fiscally responsible thing for hard-working families. This is very important to the members of the House Democratic Caucus.”

The 2009 budget resolution provided reconciliation instructions for Congress to use for both health insurance reform and student loan reform. To comply with the reconciliation instructions, the student loan reforms have to be budget neutral and reduce the deficit by $1 billion over five years. Budget rules require that both bills would move together as one reconciliation measure – they cannot be moved separately.

The House passed the legislation, the Student Aid and Fiscal Responsibility Act, in September with bipartisan support. The bill, which was first proposed by President Obama, would eliminate wasteful taxpayer subsidies to banks in the federal student loan programs and invest the savings in students, families and taxpayers. The reliable and cost-efficient federal Direct Loan program, which many schools already use, would provide students with the same loans as banks – but at a cheaper price for taxpayers.

At the press conference today, Miller cleared up several key points of confusion:

• First, any student loan bill that would be included under reconciliation would have to be deficit neutral and return $1 billion in savings to pay down the deficit. Contrary to media reports that the bill could increase the deficit, any investments included under the bill would be entirely paid for.
• Second, the legislation will preserve jobs. For months banks have claimed that switching to Direct Loans would eliminate jobs. They are wrong. The student aid bill would maintain a servicing role for lenders, which will preserve jobs and, unlike in the current system, keep banks from shipping these jobs overseas. Last year, Sallie Mae, one of four private companies that currently services Direct Loans, had to bring 2,000 outsourced jobs back to the U.S. in order to be eligible for the servicing contract.
• Third, it has always been known that student loan reform would move as part of a reconciliation measure. Last year’s House Budget Resolution for Fiscal Year 2010 included instructions for the House Education and Labor Committee to enact student loan reforms that produce $1 billion in savings to help reduce the deficit over the next five years. In order to meet these reconciliation requirements, any student loan reform will have to help reduce the deficit.
• Fourth, these subsidies to lenders have been identified as wasteful by both Democratic and Republican presidents. In addition to President Bill Clinton and President Barack Obama, who both identified these subsidies as wasteful, President George W. Bush’s 2005, 2006 and 2008 budget proposals called for reducing these federal subsidies to private banks.
• Finally, this is the only opportunity to enact these reforms. As the lawmakers said today, student loan reform must move under these reconciliation instructions – or it won’t happen.

The Last Obscenity: Will the Bank Lobby Succeed in Screwing Poor Kids?

Robert Borosage — Thu, 11 Mar 2010 10:30:31 -0500

It is, as President Obama stated, a "no-brainer." Cut the $90 billion in subsides that go to banks to make risk-free student loans that are GUARANTEED BY THE GOVERNMENT, go to direct lending, and use the money saved to increase Pell grants and tuition tax credits for working families so more poor kids can afford college. $90 billion over 10 years isn't bubkas.

The banks, of course, mobilized to save their subsidy. Republicans, led by Sarah Palin, denounced the "government takeover." But shoveling out an extra $90 billion to private banks to make risk free loans that the government guarantees isn't exactly the free market. This is the most egregious form of crony predatory capitalism that Adam Smith would condemn.

So the bill passed the House easily. And it was put in reconciliation instructions in the Senate—so it only needs 50 votes. Piece of cake.

So the banks enlisted big-time Democratic lobbyists and spent millions. They mobilized employees to pressure senators, arguing that they would lose their jobs. (Actually most of the jobs would still be there as the loans would continue. It is just the subsidies to bank profits that would eliminated.)

Now six senators—WHO SHOULD HEAR FROM YOU—have announced their opposition to voting on the student loan package in the reconciliation bill:

Blanche Lincoln of Arkansas (no surprise there)
Ben Nelson of Nebraska
Bill Nelson of Florida
Thomas Carper of Delaware
Mark Warner of Virginia (so much for New Dems)
Jim Webb of Virginia

What do six senators matter when we only need 50 votes? Because health care needs every vote it can get to pass the "fix" in reconciliation. If a couple of these folks say they won't vote for reconciliation if student loans are in the bill, the leadership, desperate to get health care done, will drop student loans.

This will be the final obscenity: The bank lobby so strong and the Democrats so weak that even a "no-brainer" taking unearned subsidies from banks and giving them to poor kids can't pass.

Despair for the Republic. This, folks, is simply ugly.

Pay Teachers More

OurFuture.org Staff — Mon, 14 Mar 2011 15:16:26 -0400

Time to Reconcile Student Loan Reform

Armand Biroonak — Tue, 09 Mar 2010 16:05:05 -0500

If some members of Congress are going to stand with banks, instead of students, then why not pass student loan reform through reconciliation? Just like Americans and health care reform –students need relief now. It is time for Congress to act on behalf of students, and not banks.

In just the past few days, a tidal wave of conservative lies has crashed onshore to try and stop student loan reform once and for all. Big lenders such as Sallie Mae are armed, spending millions to woo members of Congress to kill reform (known as the Student Aid and Fiscal Responsibility Act) that ends bank subsidies and invests in students. This reform would save taxpayers over $80 billion by ending the Federal Family Education Loan program (thus cutting out banks), with a move to federal Direct Lending of student loans, while also redirecting most of the savings to Pell Grants and community colleges. Learn more about the bill here.

But in a last ditch effort to shape public opinion, conservatives have launched attacks against reform with blatant lies. Take for instance the dishonest, inaccurate fear-mongering spewed by Tennessee Senator Lamar Alexander’s Sunday op-ed in the Washington Post that completely distorts reality about the legislation:

Myth:
“The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you'll work longer to pay off your student loan to help pay for someone else's education”

Fact:
Student loan reform would invest $40 billion in Pell Grants to help students by increasing the maximum Pell Grant, indexing it to inflation and expanding Pell Grant eligibility for thousands of students.

The senator’s comments make it appear as if interest rates will be going up with reform –but in reality they will be fixed at the current rate of 6.8%.

The truth is students will be paying more not because of reform, but because of conservative policies that stand in the way. Instead of supporting stimulus measures that would ease cash-strapped state budgets and avoid painful cuts to higher education, conservatives have said deal with. Meanwhile, many state universities have or will raise tuition by upwards of 30 percent for the next academic year –on top of the already 60 percent increase of tuition since 2000.

Myth:
“Today, roughly 2,000 lenders offer government-backed student loans on more than 4,000 campuses. One lender, Edsouth, offers Tennessee students college and career counselors, financial-aid training, and college-admissions assistance; performs hundreds of presentations at Tennessee schools; and works with 12,000 Tennessee students to improve their understanding of the college-admissions and financial-aid process.”

Fact: Private lenders’ have a dodgy record, and been more hurtful to students, not helpful. Sallie Mae, the heavyweight of the student loan industry was found in the crosshairs of a ‘pay to play’ scandal with numerous arrangements that benefited schools and lenders at the expense of students. Investigators say lenders have provided all-expense-paid trips to exotic locations for college financial aid officers who then directed students to the lenders.

While more recently, a big scandal involving Nelnet, JPMorgan and Citigroup has come out, as the federal government has sued the companies for alleged fraud worth nearly hundreds of millions for making false claims and illegally recruiting more student borrowers.

Myth:
“Gone will be the days when students and their colleges picked the lender that best fit their needs; instead, a federal bureaucrat will make that choice for every student in America based on still-unclear guidelines”

Fact: Private lenders under the current federal program must provide the same loan condition–the interest rates, terms of lending, etc. are all fixed by the Department of Education (found here). The only difference students will find is greater honesty, as financial administrators will no longer have “preferred” lender lists to coax students towards one private lender or another.

And the worse myth of them all:
"Beware: Your federal government is overcharging you so your representative can take credit for starting new government programs. Enjoy the extra hours you work to pay off your student loan."

Fact: The prior statement should really read, “Beware: Student loan companies are overcharging all of us to take their profits from a government program. Enjoy the extra hours you work to pay off your student loan because of bank subsidies and conservative policy.”

The student loan industry is a complete joke. Billions in unnecessary bank subsidies, while the federal government is on the hook for 97% of the value of their loans, be it in default or good standing. In fact, the total defaulted student loan portfolio for the Department of Education –a good portion of which were dumped back to the government when private lenders no longer wanted them—stands at nearly $50 billion.

With too many in Congress allying with banks to defeat student loan reform, it will be extremely difficult to pass a stand alone bill in the Senate. This is why I urge Congress to attach student loan reform to the health care reconciliation bill. Make your voice heard here, tell your representative to put students over banks!