WASHINGTON, D.C. – U.S. Rep. George Miller (D-CA) and U.S. Sen. Tom Harkin (D-IA), the chairmen of the House and Senate Education Committees, today said that a modified student loan proposal Sallie Mae is pushing would slash more than $8 billion off of student aid to give lenders a bonus.
“You can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets with billions of dollars that should be used to help students,” said Miller. “The House saw this proposal for what it was and soundly rejected it, instead choosing to pass the Student Aid and Fiscal Responsibility Act, which invests all of its savings in students, families and taxpayers. Americans are sick and tired of CEOs and banks taking them for a ride and are ready for policies that will reduce waste and excess and do what’s best for Main Street – not Wall Street.”
“You can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets with billions of dollars that should be used to help students,” said Miller. “The House saw this proposal for what it was and soundly rejected it, instead choosing to pass the Student Aid and Fiscal Responsibility Act, which invests all of its savings in students, families and taxpayers. Americans are sick and tired of CEOs and banks taking them for a ride and are ready for policies that will reduce waste and excess and do what’s best for Main Street – not Wall Street.”
Miller is the author of the Student Aid and Fiscal Responsibility Act, legislation passed by the House in September that would achieve $87 billion in savings over 10 years generated through student loan reform and use those savings to help students pay for college, create new infrastructure jobs by funding school modernization projects, and improve early education for children, among other things. Harkin is working with his colleagues to draft companion legislation in the HELP Committee.
“Sallie Mae and other big lenders are trying to hold on to the bad old days of student lending where back room deals generated billions of dollars in profits for their shareholders,” said Harkin. “We are working on a bill to deliver real reform and investment for students and taxpayers, not more entitlements for wealthy bankers.”
Sallie Mae’s proposal, which is a revised version of a plan they tried to get support for in the House, would instead direct more than $8 billion of those savings to help lenders, not students and families.
BACKGROUND
In September CBO released an estimate of Sallie Mae’s Community Loan proposal that estimated the program saved $17 billion less than the House proposed move to Direct Loans. The newer version score by CBO had three major changes: it sunset the program after five years; it lowered the origination free from $75 to $55; and it eliminated the short-term loan that the government would make to lenders.
Most of the savings the Sallie Mae plan generates are achieved through the gimmick of sunsetting the proposal after five years. In the original proposal only $6.5 of the $17 billion in costs were generated in the first five years driven by the expectations of larger loan volume in the coming decade. Even as Sallie Mae and other lenders push this proposal for a “short-term” subsidy they are lobbying to extend the stop-gap Ensuring Continued Access to Student Loans Act for yet another year. Ultimately, the five year sunset is only an effort to stave off the current effort at meaningful student loan reform.
“Sallie Mae and other big lenders are trying to hold on to the bad old days of student lending where back room deals generated billions of dollars in profits for their shareholders,” said Harkin. “We are working on a bill to deliver real reform and investment for students and taxpayers, not more entitlements for wealthy bankers.”
Sallie Mae’s proposal, which is a revised version of a plan they tried to get support for in the House, would instead direct more than $8 billion of those savings to help lenders, not students and families.
BACKGROUND
In September CBO released an estimate of Sallie Mae’s Community Loan proposal that estimated the program saved $17 billion less than the House proposed move to Direct Loans. The newer version score by CBO had three major changes: it sunset the program after five years; it lowered the origination free from $75 to $55; and it eliminated the short-term loan that the government would make to lenders.
Most of the savings the Sallie Mae plan generates are achieved through the gimmick of sunsetting the proposal after five years. In the original proposal only $6.5 of the $17 billion in costs were generated in the first five years driven by the expectations of larger loan volume in the coming decade. Even as Sallie Mae and other lenders push this proposal for a “short-term” subsidy they are lobbying to extend the stop-gap Ensuring Continued Access to Student Loans Act for yet another year. Ultimately, the five year sunset is only an effort to stave off the current effort at meaningful student loan reform.
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