Obama Student Loan Plan May Save More Money

The Congressional Budget Office said on Friday that a student loan reform plan backed by Sallie Mae and other lenders might save U.S. taxpayers $17 billion less than one backed by the Obama administration.

The Obama plan has already been approved at the committee level in the U.S. House of Representatives and is headed for a likely vote on the House floor next week.

The student loan industry has been fighting the administration’s plan and seeking political support for its own counter-proposal that would preserve a role for the lenders in the student loan system and furnish them steady fee income.

Congress’ budget researchers said that after counting expenses needed to make the lender plan viable, budget savings from it "would be about $67 billion over the 2010-2019 period — in contrast to the net impact of $80 billion in 10-year savings for" the Obama bill.

In addition, the lender plan "would increase direct spending by about $4 billion over the 2010-2019 period" in other areas, said the CBO in a letter to Representative George Miller, Democratic chairman of the House education committee.

Committee spokeswoman Rachel Racusen said: "This shows that the Obama administration’s student loan proposal is the superior plan for saving taxpayers dollars."

But Sallie Mae spokeswoman Martha Holler said: "This CBO score confirms that mandatory savings of $87 billion are achievable through" both plans.

Other student loan groups involved in the counter-proposal include Student Loan Corp, SunTrust Banks and Nelnet Inc.

Secretary of Education Arne Duncan will hold a news conference on Tuesday to urge passage of the Obama bill.

The education committee in July approved the Obama bill, which would shut down the $55 billion Federal Family Education Loan Program (FFELP) and shift most student lending into a program run by the Education Department.

The bill is expected to be approved by the House, where Democrats hold a substantial majority, analysts said. That would send it on to the more closely-divided Senate.

REUTERS