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EDITORIAL: Ending Private Student Loans a Good Thing

Sep. 22—For private lenders, student loans are a sweetheart deal, a federal subsidy of sorts. They assume no risk, and a tidy profit is guaranteed.

The federal government not only gives them a cut for making and administering student loans, but taxpayers back the loans if a borrower defaults.

There’s got to be a better way to help students and their families cover the rapidly rising cost of college tuition, and it appears Congress has found it: The Student Aid and Fiscal Responsibility Act of 2009.

The measure, approved handily by House Democrats last week by a vote of 253-171, would wisely remove the middleman, and use the substantial savings derived from direct federal lending to strengthen education as a whole.

But the bill is expected to encounter resistance in the Senate, where lobbyists for private lenders are lining up to save a cash cow. While it’s true, as the financial sector and their Republican puppets say, that the switch would result in job losses, much more would be gained.

The savings would be significant — at least $47 billion over the next 10 years, according to the Congressional Budget Office. While as much as $10 billion could be returned to the treasury, the remaining money would be reinvested in education.

Much of the savings would be redirected to the Pell Grant program, one of the primary means for low-income college students to pay for their education without amassing a lifetime of debt. The annual

stipends would increase from the current maximum of $5,350 to as much as $5,550 in 2010 and $6,900 by 2019.

Another $10 billion in savings would be earmarked for construction projects and workforce training programs at two-year community colleges, the backbone of the higher education system with 6 million students.

The bill also provides $2.55 billion to help improve colleges and universities that have historically served black students, and another $8 billion for early-childhood education programs.

“Today, the House made a clear choice to stop funneling vital taxpayer dollars through [bank] boardrooms and start sending them directly to dorm rooms,” said Sen. George Miller, D-Calif., the chairman of the House Education and Labor Committee.

Now, the Senate must choose. Continue to bolster the bottom line of banks, or make a timely investment in our future by helping more young adults get the education necessary to guarantee their own.

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