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The U.S. House of Representatives is nearing a vote to push private lenders
out of the federal college loan business—a move that could cost Indiana hundreds of jobs.
out of the federal college loan business—a move that could cost Indiana hundreds of jobs.
Lawmakers debated
a student aid bill yesterday that has widespread support, including from the White House. The measure is expected to win passage
today and go next to the Senate.
a student aid bill yesterday that has widespread support, including from the White House. The measure is expected to win passage
today and go next to the Senate.
Proponents of putting the government in charge of all federal loans say it would
save an estimated $87 billion, though the figure has been disputed.
save an estimated $87 billion, though the figure has been disputed.
But private lenders
such as Virginia-based Sallie Mae, which employs 1,600 in Fishers and 700 in Muncie, fear the proposal would cause massive
job cuts within the industry.
such as Virginia-based Sallie Mae, which employs 1,600 in Fishers and 700 in Muncie, fear the proposal would cause massive
job cuts within the industry.
Sallie Mae,
the largest student loan provider, said it could cut about one-third of its 8,500 employees nationwide and close some offices.
The company is uncertain how many jobs could be affected in Indiana, however.
the largest student loan provider, said it could cut about one-third of its 8,500 employees nationwide and close some offices.
The company is uncertain how many jobs could be affected in Indiana, however.
Sallie Mae executives were at the company’s Fishers and Muncie offices last month, while
holding a series of town hall meetings and petition drives in Pennsylvania, Florida, Delaware, New York and Indiana.
holding a series of town hall meetings and petition drives in Pennsylvania, Florida, Delaware, New York and Indiana.
Jon Kroehler, a Sallie Mae vice president and the
company’s top executive in Indiana, said during the visit that passage of the proposal would be catastrophic.
company’s top executive in Indiana, said during the visit that passage of the proposal would be catastrophic.
“It would force the company to take a fresh
look and go through a complete restructuring,” he said.
look and go through a complete restructuring,” he said.
The legislation would boost Pell Grants for needy students and pay for a new college completion fund, community
college reforms and more college aid for veterans.
college reforms and more college aid for veterans.
"No student in this great country of ours should have to
mortgage their future to pursue their dreams," said the bill’s sponsor, California Democratic Rep. George Miller, chairman
of the House Education and Labor Committee.
mortgage their future to pursue their dreams," said the bill’s sponsor, California Democratic Rep. George Miller, chairman
of the House Education and Labor Committee.
Yet the money also would be spent on things that don’t help pay for
college, such as construction at K-12 schools and new preschool programs.
college, such as construction at K-12 schools and new preschool programs.
And while the measure would increase Pell
Grants, it would do nothing to curb college costs, which rise much faster than Pell Grants do.
Grants, it would do nothing to curb college costs, which rise much faster than Pell Grants do.
Changes in federal
student aid would fulfill a campaign promise by President Barack Obama and transform a long-standing partnership between the
government and the private sector.
student aid would fulfill a campaign promise by President Barack Obama and transform a long-standing partnership between the
government and the private sector.
Republican critics argue it is wrong to put the government in near-total control
of student lending.
of student lending.
"Ask yourselves whether another government takeover is what we need right now," said
Minnesota Rep. John Kline, senior Republican on the Education Committee.
Minnesota Rep. John Kline, senior Republican on the Education Committee.
Many also worry about job losses in their
districts.
districts.
The measure would end the subsidized loan program under which private lenders made $56 billion in loans
backed by the government to more than 6 million students last year, compared with $14 billion in direct loans from the government.
Private lenders employ more than 30,000 people whose jobs depend on the subsidized loan program, and the industry says many
would be laid off.
backed by the government to more than 6 million students last year, compared with $14 billion in direct loans from the government.
Private lenders employ more than 30,000 people whose jobs depend on the subsidized loan program, and the industry says many
would be laid off.
Democratic Rep. David Wu of Oregon said lenders still could make all the loans they want. "What
will not happen anymore is making those student loans with taxpayer subsidies," he said.
will not happen anymore is making those student loans with taxpayer subsidies," he said.
As consumers, college
students probably wouldn’t notice any difference in their loans, which they would get through their schools. Broadly speaking,
the bill doesn’t do much to make loans cheaper or help pay them off.
students probably wouldn’t notice any difference in their loans, which they would get through their schools. Broadly speaking,
the bill doesn’t do much to make loans cheaper or help pay them off.
It does keep interest rates for some federal
loans—those based on need—from jumping from 3.4 percent currently to 6.8 percent as scheduled in 2012. Interest
rates for most other loans would remain at 6.8 percent.
loans—those based on need—from jumping from 3.4 percent currently to 6.8 percent as scheduled in 2012. Interest
rates for most other loans would remain at 6.8 percent.
Under the measure, Pell Grant amounts would rise slightly
more than inflation over the next decade, increasing on average by about 2.6 percent yearly, according to the bill’s sponsors.
more than inflation over the next decade, increasing on average by about 2.6 percent yearly, according to the bill’s sponsors.
The
bill marks the first time lawmakers have ever agreed to a long-term annual increase in the program. Pell Grants have always
depended on annual spending bills and on occasion have stayed flat or been cut when lawmakers came under pressure to reduce
spending.
bill marks the first time lawmakers have ever agreed to a long-term annual increase in the program. Pell Grants have always
depended on annual spending bills and on occasion have stayed flat or been cut when lawmakers came under pressure to reduce
spending.
However, the bill does not actually change the situation. Obama originally proposed to take Pell Grants
out of lawmakers’ hands entirely, making the program an entitlement like Social Security and Medicare, which would have cost
an estimated $117 billion — more than lawmakers have to spend.
out of lawmakers’ hands entirely, making the program an entitlement like Social Security and Medicare, which would have cost
an estimated $117 billion — more than lawmakers have to spend.
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