GOP lawmakers slam government takeover of student loans

Gautham Nagesh with some analysis of the nasty federal takeover of the student loan industry:

At 3 p.m. today several GOP lawmakers are holding a presser at the Capitol Visitors Center to protest the proposed government takeover of student loans included in the healthcare bill currently under debate. Republicans have argued the move would eliminate choice and competition for borrowers, destroy thousands of jobs, and add to the country’s long-term debt. Other critics have questioned why such a significant program is being strapped to the already massive overhaul of the nation’s healthcare system.

Sen. Lamar Alexander of Tennessee, who served as Secretary of Education under the first President Bush, will be joined by Reps. Brett Guthrie of Kentucky and John Kline of Minnesota, the ranking Republican on the House Education and Labor Committee. Alexander recently penned an op-ed opposing the proposal:

Here is what the administration and congressional Democrats have told us about this latest attempt: Starting in July, all 19 million students who want government-backed loans will line up at offices designated by the U.S. Education Department. 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. They say that this will save taxpayers up to $87 billion in subsidies that now go to “greedy” banks. In gleeful anticipation, members of Congress have lined up to spend those billions on Pell Grants and almost a dozen other programs. Banks are punished. Students are helped. Members of Congress look good.

Here is what they haven’t told us: 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 — and to help your U.S. representative’s reelection.

Here’s the Alexander’s statement from today’s press conference:

“While they’re at it with health care, the Democrats have decided to add another Washington takeover, this time of student loans. This latest Washington takeover would deprive 15 million students – who voted with their feet and chose private instead of direct loans last year – of choice from among 2,000 student lenders. Washington will replace these lenders with the equivalent of four federal call centers, making the process of getting their loans about as friendly as going to the DMV for a driver’s license. And Washington will do this by adding half a trillion dollars to the debt – and worst of all, by overcharging students for their loans. The Department of Education will borrow money from the Fed at 2.8 percent, lend it to students at 6.8 percent, and pocket the difference to spend on new government programs. But if we really want to save students money, why not just reduce the interest rate by 1.5 percentage points, to 5.3 percent, which would save the average student $2,240 in interest over ten years on their loans?”

  • elyriaohio

    The Banks provide an early lesson to students about the real world.
    If you have no credit rating, bend over & take it like a man.
    Your education is only a cash-cow for the system.

  • moira1987

    “…the nasty federal takeover of the student loan industry…”

    So is this a “news” article or an op ed? Does Mike Riggs comprehend the difference?

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  • motionview

    How absurd that the Federal government is going to completely take over a segment of the financial industry by deeming to have voted for a take-over of the health care industry; that some people’s worldview is so twisted that they can think of the student loan take-over as a “sweetener”. We’re living in bizarro world.

  • badmotherfarker

    I don’t have much of a problem with this. Almost all of my student loans are federal anyway (and I would argue that this is the case for a good majority of people). And I’ve found that dealing with/paying off the federal loans is MUCH easier than the private loans. Dealing with Citibank (who owns one of my loans) has been nothing but a nightmare. They’re more worried about making a profit while being repayed than in simply being repayed. The government just wants the money back. They intentionally put up obstacles to make it more difficult. Also, federal loans have a nice perk in that they waive interest until 1 year after graduation. Not all my private loans offer that.