Rep. Howard P. “Buck” McKeon (R-CA), the top Republican on the U.S. House Education and Labor Committee, today harshly criticized the Obama Administration’s plans to orchestrate a full government takeover of student lending. McKeon faulted the plan, discussed during a hearing by the committee, for eliminating choice and competition for students and families while failing to take meaningful steps to hold down the ever-rising cost of a college education.
“Instead of addressing the root causes of the college cost crisis, this Administration is calling for just another big-government solution,” said McKeon.
In its FY 2010 budget, the Administration proposed a full repeal of the Federal Family Education Loan (FFEL) program – a longstanding public-private partnership that provides billions in financial aid to millions of students and families each year – in favor of the one-size-fits-all Direct Loan program.
During his opening statement, Rep. McKeon questioned why all the views of financial aid professionals and the students they serve are not being consulted on this radical shift in financial aid policy.
“Mr. Chairman, what’s best for schools, and the students they serve, seems to be lost in this debate. And I’m not the only one who thinks so,” said McKeon. “This morning, Inside Higher Ed published an op-ed written by the director of financial aid at Tallahassee Community College. The article is called ‘Why I’m Sticking With FFELP,’ and he begins by saying: ‘But for all the talk about budget numbers and politics, the views of college financial aid administrators have been largely lost in the shuffle.’ … I hope we’ll think about people like this financial aid director as the debate unfolds.”
Raising further questions about the Administration’s plan to shift nearly $100 billion more in taxpayer dollars into financial aid programs that fund colleges, the committee heard testimony from Dr. Richard Vedder, the director of the Center for College Affordability and Productivity and a Distinguished Professor of Economics at Ohio University. Dr. Vedder argued that blindly expanding federal spending in this area could actually do more harm than good for college access.
“Also, a significant expansion in federal aid programs, especially student loans, almost certainly will contribute to the tuition price explosion. When someone else is paying the bills, costs always rise, and all sorts of clever regulatory moves to stop this will simply either lead to denied student access, reductions in academic quality, and/or increased university bureaucracies, already obscenely large,” said Dr. Vedder. “In total, the law of unintended consequences is at work, as the tuition bubble that federal policies such as student loans and tax credits have contributed to have undone any positive impacts that otherwise would occur.”
The committee also heard from Christopher Chapman, the president and chief executive officer of national nonprofit lender Access Group, about alternative proposals to the Administration’s plan. Specifically, Chapman discussed a financing model – the commercial paper conduit facility – that could keep private capital, innovation, and consumer services in the program while easing the financial uncertainty that caused disruptions in the student loan market last year. The conduit was created as part of emergency, bipartisan legislation enacted by Congress last year to protect borrowers from the impacts of the global credit crunch.
“Just last week, Access Group became one of the initial lenders to issue commercial paper backed by loans financed through the conduit. … This successful funding was the culmination of months of shared effort put forth by members of the last Administration, members of the current Administration, and a number of private-sector entities,” said Chapman.
“I feel there are lessons to be learned from this effort that suggest a positive path forward for federal student lending and a way to keep private capital involved in the federal student loan program,” continued Chapman. “This path could enable the Administration, the Congress and student loan providers to achieve the widely-shared objective of making available increased private funding for federal student aid at no additional budgetary cost. And it would simultaneously allow for the retention of the key virtues of the current FFELP, such as the maintenance of a diverse array of originators, servicers and financers of federal student loans, and the choice, competition, flexibility and service that only such diversity can deliver.”
For more information on today’s hearing, including copies of witness testimony and complete video coverage, please visit the Education and Labor Committee Republican website.
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