• December 22, 2014

House Passes Bill to End Bank-Based Lending

The U.S. House of Representatives voted 253 to 171 today to abolish bank-based student lending, passing a bill that would end subsidies to student-loan companies and use the projected $87-billion in savings to expand aid to students and colleges.

The bill (HR 3221), which would shift all student lending to the government's direct-loan program, would provide $10-billion in grants to community colleges, $8-billion for early-learning programs, and $3-billion for grants aimed at improving college access and completion rates. The bill would also increase the maximum Pell Grant by a set amount each year, while expanding the Perkins Loan program from the current $1-billion to $6-billion a year, and overhauling its structure.

Passage of the bill comes as a blow to the student-loan industry, which has pushed a counterproposal that that would allow banks and other lenders to continue making student loans and sell them to the government for a fee. Under the House-passed bill, lenders could compete for the right to service student loans but could no longer originate them.

Before voting on the bill, lawmakers rejected, 265 to 165, a Republican-sponsored amendment that would have created a nonpartisan commission to develop a new private-sector model for student lending. The amendment would have allowed the loan industry to continue to originate loans and sell them to the Education Department while the commission studied the issue.

The House did adopt several noncontroversial amendments, including ones that would give top priority to veterans and dislocated workers in the awarding of certain grants.

The bill now moves to the Senate, where some moderate Democrats—including Ben Nelson of Nebraska, whose home state is headquarters to the lending giant Nelnet—have raised concerns about potential job losses in their states. Lenders hold out hope that the Senate will revisit recent cost estimates of the Democratic plan and an industry alternative and take a different approach.

On Tuesday the vice chairman and CEO of Sallie Mae, the nation's largest lender, put the odds of Congress's killing bank-based lending at only 25 percent.

"I like our facts enough to be hopeful," he said at a the Barclays Capital Investor conference, according to the Student Lending Analytics blog.

But the sponsor of the House bill, Rep. George Miller, a Democrat of California, said yesterday that he is confident the Senate will pass the bill. He predicted a House-Senate conference on the measure in the coming weeks.

"I think the chances are very very good," said Mr. Miller, who is chairman of the House education committee, in a conference call with reporters. "We'll see them in conference early this fall."

Comments

1. secretlyironic - September 18, 2009 at 03:31 pm

I'd expect better of the Chronicle: The bill does not, as Kelly Field asserts, "abolish bank-based lending." It removes the banks from federally-guaranteed lending. Non-federal loans - that is, Private or Alternative loans, continue uninterrupted, if banks desire to make them.

Saying that the switch amounts to a government takeover is akin to decrying government meddling in Medicare. FFELP is a government program already, and switching federally-guaranteed, federally-subsidized loans into the Direct system is not exactly an unprecedented "takeover."

2. atana09 - September 19, 2009 at 10:52 am

Well it might reduce the footprint and effect of corporate based loans, which are part of federal programs. Which despite all the hype by these lenders these co-opted programs have not been beneficial to students, families or the nations economy. As noted by 'secretly ironic' changes or reform of a program which had been begun by the federal government is hardly a takeover.

But likely Ms. Field wrote in the manner she did for overall clarity and readability rather than semantic accuracy. And if Chronicle and Inside Higher Ed and etc did not write these articles there would be little or no exposes or information getting out about the shadowy goings on within corporate educational lending. Despite the constant scandals, and back room dealings the general media does a very poor job covering these important issues.

When those who are pocket legislators kowtow to the subsidized educational lenders corporate agendas or tries to claim serious concerns about job loss something is very askew. There may be some minor job losses in Nebraska due to the massive (and from a market sense artificially bloated) presence of such as Nelnet. But those losses are not offset by the economic losses inherent to a system which has the best people of each generation become little more the economic chattel due to the inflated debts propagated by these educational lenders. An entire generation has been fed into their never satiated maw, and as a result cannot buy cars, consumer goods, homes or etc. Or if they can it is so delayed and scattered as to be irrelevant for supporting our troubled economy. As luminaries such as Dr. Warren have noted one of the elements which is strangling the American middle class has been excessive student debt.

Its appalling that the Vice Chair of Sallie Mae (Albert Lord) has the confidence or arrogance to blandly state that there is only a 25% chance of reform. One would wonder what, and who has been so controlled as to give Lord the presumption to make such a statement. It does indicate a belief on his part that SMC effectively controls the Senate. But perhaps they do, as the most recent over billing is in the range of 22.3 million +, which originated from that company-and congress seems to be unconcerned.

It is well past time for Congress to finally realize that what is good for Sallie Mea or Nelnet is certainly not good for the country. And lord knows it's not good for students, families, and academe.

3. laoshi - November 17, 2009 at 10:29 am

Fascism, pure and simple. I'd acquiesce if they'd just bail us out like they did those Wall Street bankers and insurance weasels.

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