The U.S. House Education and Labor Committee continued its march toward a bigger, more intrusive federal government today with passage of sweeping legislation to impose a fully government-controlled student lending system on students and schools. The Democrats’ legislation, H.R. 3221, abolishes the Federal Family Education Loan (FFEL) program and redirects tens of billions in government savings and earnings toward new entitlement programs that do not directly benefit low-income students’ pursuit of higher education.
“The speed with which Democrats are orchestrating a full government takeover of our classrooms and communities is astonishing,” said Rep. John Kline (R-MN), the panel’s top Republican. “First, we saw a drive toward complete government takeover of our nation’s health care system. Now, we see government seizing control of student lending, forcing the private sector out and welcoming in a mountain of public debt. I’m almost afraid to ask: What part of our lives will be handed over to government next?”
Democrats drafted their legislation with the option of moving it through a process called “budget reconciliation,” a procedural maneuver established to facilitate cuts in entitlement spending. Nonetheless, the bill creates a number of new entitlement programs and significantly expands funding for others. Republicans objected to this new and expanded entitlement spending, particularly in a time of record federal debt and deficits, and pointed out that many of the new programs provide no benefit whatsoever to low-income students pursuing a college education. For example, the bill creates a new “early learning” initiative aimed at children aged zero to five, and establishes funding for school construction at both the K-12 and postsecondary levels.
Republicans Offer Comprehensive Plan to Stabilize Lending, Invest in Students
Rep. Brett Guthrie (R-KY), the top Republican on the Higher Education, Lifelong Learning, and Competitiveness Subcommittee, offered an alternative to the Democrats’ legislation that would stabilize the student loan programs in a tumultuous economy and establish a path for comprehensive reform in the future.
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The GOP amendment extends bipartisan reforms enacted last year through the Ensuring Continued Access to Student Loans Act (ECASLA) to provide a federal backstop for the FFEL program in times of economic uncertainty, while still allowing flexibility for private capital to remain in the system. By any measure, ECASLA has been a success; not a single student has been denied a loan, even in the current economic downturn. The amendment extends ECASLA through 2014, aligning it with other financial aid programs recently reformed by Congress under the Higher Education Act. This change is expected to save taxpayers approximately $24 billion over the next four years.
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Rep. Guthrie’s amendment also establishes a commission to study student lending and recommend structural changes to protect students and taxpayers. The Commission will provide to Congress recommendations on a new model for student lending that uses private capital, generates competition to ensure choices for borrowers, and prevents waste, fraud, and abuse. It will look at key factors such as customer service, outreach activities, default prevention, and financial literacy. It will also examine financial concerns such as how to ensure stability in times of economic disruption and use market forces in the financing structure. Finally, it will look at structural issues such as how to target benefits to students who need them, and whether it is possible to integrate loan repayment into tax withholding, as is done in other countries.
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The GOP plan also invests in future generations by directing the remaining savings to deficit reduction. With the federal deficit projected to reach $1.8 trillion this year alone and American families increasingly worried about out-of-control government spending, Republicans are prioritizing savings for taxpayers to protect future generations from crippling debt.
By refusing to support the amendment, Democrats missed an important opportunity to consider a thoughtful, independent approach to student loan reform that rejects massive entitlement expansion in favor of choice, competition, and innovation in student lending.
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