The House Votes to Take Over Student Loans

Since I work in the field of higher education I am more tuned into the news regarding student loan funding.  We have been tracking the funding bills that have been coming up and this one seems to smack of too much government involvement.  An interesting article was posted this morning at Redstate.com on this very subject in regards to HR 3221. 

From RedState.com:

If you want an indication of just how radical the Democrats in Congress have become, consider the vote on H.R. 3221. The legislation, which I wrote about yesterday, shuts down all private lenders for higher education student loans, requires that colleges and universities adhere to a new federal bureaucracy, creates a new Green Schools Czar, and hints that any school not complying will see its students denied federal student loans.

Last year, Congress passed the Ensuring Continued Access to Student Loans Act (ECASLA). The bill passed in the House 388-21, including 221-0 among Democrats. The Senate passed it by unanimous consent. President Bush signed it. The legislation was a bi-partisan piece of legislation that allowed private sector involvement in student loans without a new federal bureaucracy.

This year, the Republican substitute to HR 3221 would extend ECASLA programs through 2014 and create a commission to develop a new private sector model for student lending. The amendment failed 165-265. 257 Democrats unanimously voted no.

Final passage of HR 3221 was 253-171. 4 Democrats voted no, 6 Republicans vote aye.

The Democrats have now rejected the same legislation they unanimously supported last year in favor of a new, expansive federal bureaucracy.

Some of you may say, “so what, the government is already involved in backing funding for the Stafford program.”  This may be true, but what this will do is give total control of the student loan system to the Fed eliminating any choice by students.  Why was the original legislation a good idea last year but all of a sudden the previous vote meant nothing?  Ahh, you have to just love politics!

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6 Responses

  1. The change was necessitated by the almost total shutdown of bank lending to students this year — a result of the collapse of the banking sector.

    Other changes that should have been noted in your piece are

    — Obama is significantly increasing the funds available under the program,

    — The program now no longer costs the Federal Budget (it is no longer a budget buster), and

    — Interest rates will remain at 3.4% instead of the Bush administration plan of increasing the interest rate to 6.8%, which pretty much would have killed the usefulness of the program.

    Republicans vote no on anything that is Obama, so no news there.

    There is a clause about the federal government can make rules, and the rules that the federal government is making are to hold down excessive fees and charges that Universities have been adding to college costs.

    Next time, a bit more research.

    • The idea is that the fed is taking over yet another part of our economy. Who’s paying for this encroachment? We are Mr. Mike. I realize you don’t have a problem with that, but I do. Giving this much direct control over educational funding is a huge problem instead of allowing the rates to fluctuate, like they always do, in the capital markets.

      The change was necessitated by the almost total shutdown of bank lending to students this year — a result of the collapse of the banking sector.

      Enrollment of new students is way up in undergraduate institutions and they are not being turned away. Graduate institutions, especially those in professional programs, have had no disruption of funds.

      There is a clause about the federal government can make rules, and the rules that the federal government is making are to hold down excessive fees and charges that Universities have been adding to college costs.

      A great program that had been instituted by progressive institutions called “school as lender” allowed schools to cut some of the costs involved with the whole process. The most direct savings for the schools came with the origination fees which several institutions cut directly out of the students financial obligation. The government decided to cut this out for fear of collusion but there was no evidence.

      Bottom line in my book is that the government should not get involved at this level. Maybe create some guidelines that makes it easier for all students to borrow funds, not just those that are at the poverty level.

  2. Perhaps you missed these two sentences in my original reply:

    – Obama is significantly increasing the funds available under the program,

    – The program now no longer costs the Federal Budget (it is no longer a budget buster)

    You and I are not paying for this program. We were under Bush.

    It would also accomplish much more, including saving $4B in costs. That money saved went for things like the clunker program.

    http://money.cnn.com/2009/02/26/news/economy/obama_loans.reut/index.htm

    — It ended money that the Bush Administration gave to Universities and Colleges – money that you and I were paying.

    — If you had a single doubt about Bush paying for the program (read, you and I), here is a quote from the article (so much for free enterprise):

    “But the proposal brings to a head years of criticism that the FFELP is too expensive, provides lenders with excessive subsidies, and ties higher education funding too closely to the unpredictable ups and downs of Wall Street.”

    — The new program is self funded. They gov’t lends the money out at a low interest rate and is then repaid with interest. There will be some bad debts, as with any loan program, but if anyone has the capacity to collect is the fed gov’t

    — Credit markets did affect student loans, specifically loans that were non-parent cosigned. Graduate school programs were always almost universally 100% federal loans and were unaffected.

    Here is a Fox Business news link that says pretty much what I just said. http://www.foxbusiness.com/search-results/m/21976354/student-loan-availability.htm

    I thought you knew this stuff.

  3. Perhaps you missed these two sentences in my original reply:

    – Obama is significantly increasing the funds available under the program,

    – The program now no longer costs the Federal Budget (it is no longer a budget buster)

    You and I are not paying for this program. We were under Bush.

    It would also accomplish much more, including saving $4B in costs. That money saved went for things like the clunker program.

    — It ended money that the Bush Administration gave to Universities and Colleges – money that you and I were paying.

    – If you had a single doubt about Bush paying for the program (read, you and I), here is a quote from the article (so much for free enterprise):

    “But the proposal brings to a head years of criticism that the FFELP is too expensive, provides lenders with excessive subsidies, and ties higher education funding too closely to the unpredictable ups and downs of Wall Street.”

    – The new program is self funded. They gov’t lends the money out at a low interest rate and is then repaid with interest. There will be some bad debts, as with any loan program, but if anyone has the capacity to collect is the fed gov’t

    – Credit markets did affect student loans, specifically loans that were non-parent cosigned. Graduate school programs were always almost universally 100% federal loans and were unaffected.

    In the next post I’ll provide some links.

  4. How many posts were you going to repeat on this one. Interesting.

    College enrollment is at an all time high. Student funding is always an issue (in the undergrad environment) but it gets done. People find a way to fund education as the video clip you posted points out. Putting the government in control of this much power over the higher education system is the height of elitism (one of your favorite words old buddy!)

    Since you didn’t read it the first time, I’ll repeat my words here:

    Bottom line in my book is that the government should not get involved at this level. Maybe create some guidelines that makes it easier for all students to borrow funds, not just those that are at the poverty level.

    Taking over the student loan system, even if it is self funding, is a massive power grab at the highest level.

    Did you even watch the Foxbusiness video you posted?

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