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?”