|
WASHINGTON - Congressman Tom Petri (R-WI) today introduced the Student Loan Auction Market (SLAM) Act. His proposal would require the Secretaries of Education and the Treasury to lead a study group of technical experts to design ways to auction the rights for private lenders to originate student loans and receive government subsidies.
"Prior to the enactment of the College Cost Reduction Act in September, U.S. taxpayers were over-subsidizing student loan companies participating in the Federal Family Education Loan (FFEL), or guaranteed loan, program by $3-5 billion per year," said Petri. "That legislation made useful progress, but the key problem is that the archaic guaranteed loan system has failed to capture the actual cost of lending and instead relied on arbitrary, politically-set formulas that led to tremendous over-subsidization."
"The market provides a perfect solution to this failed, central-planning approach: an auction," Petri said. "Every day the U.S. government and business community uses market-based mechanisms, such as auctions, to determine market price. Earlier this year, I offered a market-mechanism amendment that was unanimously adopted by the Education and Labor Committee, and the bill was ultimately passed by an overwhelming majority in the House."
But when the College Cost Reduction Act was conferenced with the Senate, Petri explained, Sen. Ted Kennedy (D-MA) insisted on using his version of the auction idea.
"In the conference, the pragmatic House language was entirely removed in favor of a much more prescriptive Senate approach," Petri said. "While the intention to include an auction reform was laudable, getting the details right on such a program is incredibly important to students, taxpayers and lenders. Getting the details wrong can discredit the idea."
The SLAM Act would allow the government to test both the Senate and House market-based models independently, and then study which pilot is more effective.
|
