07.12.07
John Carter Votes Against Cutting Student Loan Rates, Again
As he did back in January, John Cater and Student Loans, Rep. John Carter (R- Round Rock) again voted against an overhaul of the student loan program. He voted against the “little guy” or as Sen. John Cornyn called in the “mythical little guy”.
The House approved far-reaching changes in student aid programs Wednesday, voting to slash $19 billion in federal subsidies to student lenders over five years while increasing grants for needy students and halving interest rates on federally backed loans with the savings.
The bill passed 273-149 in a sometimes-raucous debate, with 47 Republicans joining Democrats, who took control of Congress this year on promises to help the middle class with the escalating costs of higher education.
The bill marks a stark reversal of fortune for the student loan industry, which for more than 10 years had largely enjoyed unflagging support under the Republican majority.
Investigations by Congress, the media and the New York attorney general bruised the standing of lenders, exposing systems of paying commissions to colleges to win business and offering college officials free trips and other perks.
The University of Texas at Austin’s former financial aid director, Lawrence Burt, was fired in May after it was found that he had invested in a company and then placed its student loan subsidiary on a list of recommended lenders.
Though President Bush opposes some elements of the bill, it is widely expected that a broad overhaul of student aid will become law this year. Bush himself has proposed cutting government subsidies to lenders by $16 billion.
The Senate is expected to pass legislation this month that would reduce the subsidies by $18.3 billion while increasing the maximum Pell grant, the nation’s major assistance program for low- and middle-income students, more swiftly than the House bill does.
Reps. Lloyd Doggett, D-Austin, and Michael McCaul, R-Austin, voted in favor of the House bill; Reps. John Carter, R-Round Rock, and Lamar Smith, R-San Antonio, voted against.
Also interesting to see McCaul vote with the Democrats on this one, attempting to distancing himself from the extreme right. Speaking of the extreme right, Rep. Carter will try and explain this away that he did it to protect jobs and that it’s too much spending, yadda, yadda, yadda. It’s his ties and campaign contributions from the lender Sallie Mae and the possibility that this change will scuttle a buyout deal of the company, that are driving his opposition:
Student lenders, who had lobbied heavily against the bill, predicted that it would drive some lenders out of business and reduce services and discounts offered to borrowers. A group of private bidders planning to buy Sallie Mae, a publicly traded company that is the nation’s largest student lender, warned the loan company that both the House and Senate bills might cause the $25 billion deal to fall through, according to a news release from Sallie Mae.
The release also said Sallie Mae “strongly disagrees with this assertion” and would move to close the deal as rapidly as possible.
Of course they’d say that, they’re trying to sell the company. The Center for American Progress has an informative page up on this bill, Dealing With Debt, excerpt below the fold.
The bill, H.R. 2669, comes at a time when students need it the most. College costs have grown nearly 40 percent in the past five years, and 60 percent of all college graduates leave college with debt. Between 2001 and 2010, 2 million academically qualified students will not go to college because they cannot afford it. Such substantial cost and debt drains our economy and saps from our competitiveness in a globalizing market in addition to holding back some of our best and brightest students.
The Pell Grant system was supposed to help students through college, but the system is currently in disarray. In 1976, Pell Grants could cover up to 72 percent of the cost to attend a public four-year university; now the maximum grant only covers 41 percent. That leaves students with less support and more debt. Even worse, that debt translates into high interest payments to third-party lenders that prey on students. The government subsidizes these lenders, hoping to cut down costs, but commercial banks actually turn a substantial profit off the college loans, pocketing the handouts.
Now the College Cost Reduction Act promises to do something about it by:
- Cutting interest rates in half over the next five years.
- Raising the maximum Pell Grant by at least $500 over the next five years to $5200.
- Providing tuition assistance to undergraduates who commit to teaching in high-need public schools.
- Limiting the amount that borrowers have to pay to 15 percent of their discretionary income and allowing for loan forgiveness in the event of economic hardship and after 20 years of payments.
All these reforms add up to the single largest investment in higher education since the GI Bill. Surprisingly, this legislation is as bold as it is practical. By cutting excess subsidies, the federal government can open new doors to college at no new cost to the taxpayer. That’s an investment with infinite dividends.