February 23, 2006

Pryce Improves Efficiency, Ensures
Equity in Student Loan Program

Successful Effort Will Save Millions of Dollars for OSU Students

COLUMBUS, OH – Congresswoman Deborah Pryce (R-Upper Arlington) today submitted the following editorial:

In 1965, Congress passed the Higher Education Act to help low - and middle-income students pursue higher education.  Today, the federal government invests more than $70 billion in direct financial aid to students and families, and hundreds of millions of dollars are provided to colleges and universities so that they may better serve their students. 

Recently, Congress passed the Deficit Reduction Act, legislation improving a number of government programs and saving taxpayers nearly $40 billion over the next five years.  The bill streamlines student loan programs by reducing excess federal subsidies to lenders.  Currently, lenders are guaranteed a certain interest rate return by the government loans.  When the interest rate that borrowers pay rises above this guaranteed rate of return, lenders have been permitted to keep the excess revenue.  The Deficit Reduction Act eliminates this and , without taking away federal assistance available to students, saves $15 billion. 

The Act then redirects these savings back into the student loan program, pumping $2.3 billion into new and existing grants and reducing student loan fees.  Under the bill, loan limits have been increased for the first time in more than a decade, and total loan fees have been reduced from up to 4% today to just 1% on all student loans.  Finally, additional grant aid will be provided to low-income, high -achieving students, as well as to students pursuing degrees the critical areas of math and science.  Ultimately the Act yields a savings of $12.7 billion to the taxpayer, while also providing students with valuable added resources. 

In addition to providing students and taxpayers a better bang for their buck, the bill is equally important in what it did not do.  During House/Senate negations on the bill, I successfully fought for the inclusion of a provision in the conference report to bill that will save students at The Ohio State University roughly $6 million over four years. 

Under an earlier version of the Deficit Reduction Act, the U.S. Department of Education would have been prohibited from waiving any or all of the 3% origination fees on its Direct Loans.  The language I supported allows the Secretary of Education to waive a portion of the fee on Direct Loans, thus saving students at OSU – a Direct Loan university – millions of dollars. 

The prohibition on waiving origination fees was considered as a cost-savings to taxpayers.  I was able to successfully argue that these savings were minimal, and of lesser importance to the competitive disadvantage at which OSU would be placed against non-Direct Loan schools.  As originally written, the bill would have allowed for the disparate treatment of students under the two loan programs.  Federal programs should treat students equitably, and students at Ohio State should not be required to pay higher fees than those at other universities.

The Deficit Reduction Act was recently signed into law by the President, and came as a welcomed relief to Americans concerned with our nation’s budget deficit.  But as a Member of Congress who places great value in higher education (and a proud graduate of The Ohio State University), I was pleased to help improve our nation’s student loan program, as well as protect OSU students from being asked to shoulder a disproportionate burden of federal budget restraint.