Education Secretary Arne Duncan stepped up the campaign today to end the privatization of the student loan market and save the federal government $87 billion dollars that can be plowed into Pell Grants to make higher education affordable to students. Duncan frames the situation well.
For too long, bankers have gotten a free ride from the U.S. Department of Education.
Under current law, taxpayers provide as much as $9 billion each year to subsidize guaranteed student loans issued by banks. The banks earn profits on the interest; if students default, taxpayers take the loss, not the banks. In other words, working Americans pay while bankers get rich […]
The banks have had plenty of help with government bailouts and other subsidies while working families and students are increasingly squeezed. President Obama wants to eliminate the subsidy for banks and use that money to help poor and middle-class students and adults attend college.
Duncan directly challenges the pervasive myth from lobbyists that 35,000 jobs are at stake if Congress passes the student loan bill, a dubious statement if there ever was one, considering that credible studies estimate only 30,000 employees in the student lending market TOTAL, and that private companies are likely to get the contracts to administer the federal loans. As Duncan says:
The president’s plan actually creates jobs and draws on free-market principles by selecting private companies through a competitive process to service student loans issued directly by the Education Department. These private companies, including Sallie Mae, compete for our business and are evaluated on the quality of their customer service and their default rates […]
The banking industry’s claims that it wants to protect American jobs are also suspect. The fact is, Sallie Mae sent thousands of American loan servicing jobs overseas in 2007 to further increase profits, and it agreed to bring them back last year only to compete for our loan-servicing business.
As the fact sheet from the House Education and Labor Committee makes clear, the government guarantees all of these student loans currently, and simply pays out a subsidy to the banks for the privilege. There’s absolutely no justification for protecting corporate welfare to the banks in this case. George Miller, the chair of the committee, put it best: “It’s not news that lenders don’t like this bill, but college students overwhelmingly do. We can’t let their voices, or the points above, get drowned out by well-heeled lobbyists.”
The student loan lobbyist’s counter-proposal would cost taxpayers $17 billion dollars more in pure subsidy, directly to the likes of Sallie Mae and JP Morgan. I don’t know how you call this anything other than a war on students.
This blog post offers a good indication of the important swing votes on the legislation. The student loan bill could be passed through the reconciliation process.
