01.21.07

John Carter And Student Loans

Posted in District 31, Around The State, Williamson County at 12:26 am by wcnews

This week Rep. John Carter voted against the bill that cut interest rates on student loans in half, form 6.8 to 3.4. He cited as his reasons that this bill does nothing to expand access to higher education and it could cost some in his district their jobs. This TDP article, Carter votes against cut in student loan rates, lays out much of his argument against the bill. While it may not have directly expanded access - it’s feasible would-be students may be more likely to apply for these loans with the rate lowered, therefore expanding access - it does save money for those using these loans. Democrats do have plans to increase Pell Grants and give tax breaks to parents paying for tuition and the cost of college. No bill can do everything and this one is no different.

The other part, about job loss in his district, is a little more iffy. This AAS editorial, Give students the tools to afford college, actually does a pretty good job of showing what this is really all about:

For that (..to get more financially struggling students into college.), Congress needs to overhaul its student loan system, which depends heavily on private lenders, such as the giant SLM Corp., known as Sallie Mae. Private lenders, including Sallie Mae, have been subsidized for years, and most of their loans guaranteed repayment by the government if the borrower defaults.

Private lenders opposed the House bill, which passed 356 to 71, because it would be paid for by cutting $6 billion in subsidies the lenders now receive. Those subsidies pay the interest on some loans while the borrowers are in college, and for other items such as fees and insurance.

U.S. Rep. John Carter, R-Round Rock, voted against the bill because he thinks it could cost up to 800 local jobs at Sallie Mae, which has a large operation in Killeen. The bill’s opponents argue that the loss of profit could drive some lenders out of the business of student loans. Certainly Sallie Mae would not make as much profit under the bill, but it is unlikely to get out of the business altogether.

Officially, Sallie Mae said it supported trimming the interest rate, but not the way the House bill went about it. Carter’s office says he voted his district in opposing the student relief act after he received hundreds of letters from Sallie Mae employees. But Carter only voted part of his district because he likely represents thousands of college students borrowing money for tuition.

[…]

A study by the U.S. Public Interest Research Group found that direct loans from the U.S. Department of Education cost the government far less than those administered by private lenders. Most student loans, however, are through private lenders such as Sallie Mae, which has $142 billion in loans to 10 million students.

From this editorial and the TDP article we learn that the private lenders have a lot to lose if this bill passes. We can also see, from the study cited in the AAS editorial, that the government does this more economically than the private lenders do. From that we can surmise that Carter’s excuse is more about protecting that government subsidy to the private lenders than those jobs, per se.

From the TDP story and Google News on this topic it was easy to notice that this man, Kevin Burns, and his group, America’s Student Loan Providers (ASLP), were mentioned quite a bit. And from the 2005 article, and here, we see who they represent:

The ASLP represents lenders, such as Sallie Mae, that provide students with loans for college.

So we see a so-called conservative backing a corporate constituent over the tax paying constituents. The government can do this more economically than the private lenders. This is a good thing to do, even though much more needs to be done, to make college less expensive. But as usual, with John Carter’s votes, it makes one wonder whose side he is on.

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