“President Barack Obama’s plan to eliminate subsidized student loans by companies led by Sallie Mae won approval today from a House committee.
Representative George Miller’s legislation, which includes Obama’s plan, passed the House Education and Labor Committee on a 30-17 vote. Miller, a California Democrat, heads the panel.
Obama and Miller seek to end a 16-year-old arrangement in which the Education Department runs competing college lstudent loan systems. The 43-year-old Federal Family Education Loan Program subsidizes and guarantees student loans made by private lenders. A second program, created in 1993, enables the government to make loans directly to students.
Miller and Obama want to eliminate the guarantee program and switch all new federal loans to direct lending, starting in July 2010. Miller’s proposal, like Obama’s, would let companies compete for loan-servicing tasks such as processing payments and collecting on defaults.
The nonpartisan Congressional Budget Office estimates that Obama’s plan would save $87 billion over 10 years. Miller’s legislation would direct $40 billion of those savings into Pell Grants, and $10 billion into early-childhood education grants. It also would use $10 billion to help reduce the deficit.
The bill will end “wasteful taxpayer subsidies that are keeping a broken system afloat” and protect college student loans from turmoil in the financial markets, Miller said at the meeting.
Miller’s legislation also includes administration proposals to simplify college-aid applications and create new grants for community colleges and early-childhood education.
Reston, Virginia-based SLM Corp., known as Sallie Mae, is the biggest U.S. provider of student loans, followed by Citigroup Inc.’s Student Loan Corp. in Stamford, Connecticut, and Lincoln, Nebraska-based Nelnet Inc. Sallie Mae made $24.2 billion in student loans last year, 74 percent of them federally guaranteed….”
By Molly Peterson
www.bloomberg.com
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