I am referring to the fact that at 2:16 PM this afternoon, the House passed HR 3221, the Student Aid and Fiscal Responsibility Act of 2009. The act effectively takes one last deep drag from the Student Loan cigarette, and flicks it to the ground, in another industry takeover. The Washington Post reports:
Earlier I posted about a similar bill in the Senate, and one whose existence now makes significantly more sense. The bill is S.1541, a bill introduced by Senator Sherrod Brown of Ohio, "A bill to amend title IV of the Higher Education Act of 1965 to authorize private education loan refinancing under the Federal student loan program."
Currently, the federal government supports college lending in two major ways. Under the Federal Family Education Loan Program, which dates to the 1960s-era Great Society, it subsidizes banks and other entities that lend students money at favorable rates, and it guarantees lenders against loss if students default. Under the William D. Ford Federal Direct Loan Program, launched in the early 1990s, the government itself is the lender.
Education Department data show that 4,463 postsecondary schools participated in the public-private program in the past academic year, accounting for about $74 billion in loans. The direct lending program had 1,742 participating schools in the same span, with $22 billion in loan volume. If the House bill becomes law, new lending under the government-guaranteed program would end. Essentially, the government would become the sole originator of federal loans.
It only makes sense that if the federal government is going to take over responsibility for making student loans, that they assume all the rest of the outstanding ones as well. If the House bill flicked the cigarette to the ground, the Senate bill stamps it out altogether.
The House bill passed today almost strictly along party lines. Republicans are obviously wary of yet another government takeover:
"It is another government takeover, in this case of a $100 billion loan industry," said Rep. John Kline (Minn.), ranking Republican on the committee. He drew a parallel to the health-care debate, in which an expanded federal role is also at issue. "It's Congress stepping in and choosing the public option instead of the private option, the private-public partnership," Kline said. Two Republicans on the committee support the bill; most are opposed.And members of the $100 billion industry are no less concerned.
"If the Department of Education, in its monopoly, didn't do a good job, the schools and students wouldn't have someplace else" to obtain loans, said John F. Remondi, vice chairman and chief financial officer of Sallie Mae, based in Reston. "Our view is, what's kept them honest to this point in time has been the competition from lenders like ourselves."I'll be digging through this bill tonight to try to find out some more details on the latest takeover, including an apparent amendment entered by George Miller on making sure ACORN and their ilk are not involved.
Choice and competition, anyone?
Patriot Room links. Thanks!