Washington
The banking industry's bid to keep its central role in the system of federally subsidized student loans may have just gotten a little tougher.
The nonpartisan Congressional Budget Office, at the request of Democrats, made another review of the latest alternative the industry proposed to President Obama's plan to end the bank-based loan program. And the budget office concluded the industry plan would save taxpayers about $8.5-billion less than would the Obama administration's plan.
The budget office has estimated the president's plan would save nearly $87-billion over 10 years by ending federal subsidies to private student-loan companies and instead supplying all student loans directly to students through the Education Department.
The loan companies, in trying to discourage Congress from taking that step, proposed various alternatives in which private lenders would play a reduced role in the federal system of loan delivery. Their main current proposal was previously estimated by the Congressional Budget Office to save taxpayers about $82.5-billion over 10 years. The loan companies have said that Congress should consider that amount of savings to be nearly comparable to the amount that would be saved by the Obama administration plan, given the industry plan's added benefit to colleges of maintaining the loan-delivery system in a form closer to what most colleges already use.
But that $82.5-billion estimate was based on having the industry proposal in place for five years, after which the bank-based system would be phased out. The new estimate was calculated based on keeping the industry alternative in place for all 10 years. That estimate shows the industry plan would save a little more than $78-billion over 10 years.
The new estimate may have significance for some in Congress, but it probably won't have a large effect on the debate, said Mark Kantrowitz, publisher of FinAid, a Web site that provides advice on financial aid.
"In a way, it is irrelevant whether the $87-billion or $78-billion figures have any connection to reality," Mr. Kantrowitz said, "as these figures are the excuses needed to justify spending more money on student aid without having to raise taxes or cut other programs."
Loan-industry representatives said Senate Democrats, by asking the budget office to assume that the industry proposal's provisions are extended for a full 10 years, aren't reviewing the plan as set forth by the lending community. "This is not an estimate of the community proposal," Kevin Bruns, executive director of America's Student Loan Providers, a coalition of loan providers, said of the new budget analysis.
Comments
1. olearye - March 02, 2010 at 06:37 am
Thanks to the Chronicle for presenting the findings in a clear and concise manner. Mr. Bruns of America's Student Loan Providers seems to be complaining that the CBO didn't play fair in its estimates because it used the same time frame to compare the administration's and lending industry proposals rather than the industry's half-life gimmick. Indeed, it is not an estimate of the loan industry proposal. It is an honest apples to apples comparison.
2. atana09 - March 02, 2010 at 09:28 am
Well the half life gimmick has been used before by the educational debt industry, namely when it was convenient for them to doctor the default rate data to their favor.
About the costs comparision, it would be interesting if these assessment numbers also included the massive over billings like the 9.5 scandals and the individual instances of over billings which are so distressingly common. Because of these repeated instances it would be difficult to believe loan industry assessments of saving money have any more credibility than William Tweed's cost statements on the courthouse. It's a nice facade but something is drastically wrong behind it.
However we're in for a propaganda blitz by these lenders. In Denver there's a very manipulative billboard which shows a strategically stereotyped minority woman, glazed over with anxiety...and the text states that even considering student loan reform will cost her job. And that ad demonstrates the arrogance inherent to this industry, to have the gall to use images of people for whom their rigged debt for education scheme has been so injurious, to defend the continuance of the whole detrimental scheme.
3. 11132507 - March 02, 2010 at 12:42 pm
The FFELP industry will continue to play fuzzy math and debate every independent and/or common sense finding of President Obama's proposal no matter what, and their motivation has much less to do with saving working class jobs than it does maintaining their billions in corporate welfare, which has afforded their executives very comfy lives.
4. sniktaw - March 03, 2010 at 11:22 am
One of the loan industry giants, had little concern for the welfare of their employees when they outsourced jobs overseas several years ago. Don't use that excuse now, guys.