WASHINGTON – Rep. Brett Guthrie,R-Ky.,tried to preserve the private student loan sector,but Democrats said nay.
Guthrie proposed an alternative to the Student Aid and Fiscal Responsibility Act during the House Education and Labor Committee's markup of the bill Tuesday.
The bill,which is sponsored by Rep. George Miller,D-Calif.,the committee chair,would allow the federal government to take control of student lending.
The bill would greatly expand the Federal Direct Loan Program by July 1,2010,and alter the private sector's way of doing business.
Miller's bill passed the committee by a vote of 30-17. The House is expected to vote on the bill before its August recess.
“It's not the appropriate policy we need,” Guthrie said of Miller's bill.
Guthrie's amendment would have extended the Ensuring Continued Access to Student Loan Act,which Congress passed last year to help private lenders during the credit crunch,to 2014.
That law allows private lenders to buy loans from the Treasury Department,which has been selling cheaper loans than the market because of the recession.
Miller's bill is expected to generate $87 billion in savings over 10 years. The money would be used to expand the Pell Grant program,which helps low-income undergraduates,bolster grant programs and invest in historically black universities.
Conversely,Guthrie projected his amendment would generate $24 billion in savings over four years. Guthrie said the savings would go toward Pell Grants.
The committee voted 30-16 to defeat the amendment.
Rep. John Kline,R-Minn.,the senior committee Republican,said taxpayers would have benefited under Guthrie's amendment because the federal government is making about a $6 billion profit under the current law.
He said the law “is proof positive that we can find bipartisan solutions that maintain stable access to loans,protect taxpayers and preserve a real role for the private sector.”
Republicans on the committee argued that phasing out private lenders would hinder competition and innovation. Democrats argued that under Miller's bill they are cutting out the middleman between the government and students.
“It's a debate about … whether the taxpayer money should be spent to prop up a private industry,” said Rep. John Tierney,D-Mass.
Miller said most private lending companies and agencies will receive contracts to service loans,including default prevention counseling and assisting with repayment.
He said the private sector will lose only its ability to originate loans.
“It makes no sense to continue to pay out those dollars for that purpose when we have this opportunity,” Miller said.
Miller's bill also emulates President Barack Obama's budget request to phase out the private sector from student lending.
The Obama administration has touted the plan as way to save taxpayer money that goes to subsidize payments to the private sector.