Plan Pushed on Lending to Students

The Obama administration on Wednesday sought to bolster support for its plan to overhaul student lending, attacking banks that oppose it for enjoying "a free ride from taxpayers for too long."

In a telephone conference with reporters, Secretary of Education Arne Duncan repeated the administration’s assertion that the direct offering of student loans by the federal government, and an end to subsidies to private lenders, would save taxpayers $87 billion over 10 years. The savings would be used to aid early -childhood education, community colleges and needy college students.

The administration plan passed the House of Representatives last year but has stalled in the Senate. Mr. Duncan said he remained confident that the Senate would pass the measure, which President Obama has called a "no-brainer."

But the banks that have offered the most loans, with federal subsidies and guarantees, have hired lobbyists and mounted advertising campaigns, saying the plan would cost jobs and reduce consumer choice. Congressional aides say passage is in peril.

Mr. Duncan disputed the assertion that jobs would decline, saying that private companies would receive larger, competitive contracts to service the loans. Taking up the administration’s increasingly populist tone, he described the banks opposing the plan in blistering terms.

He called the loan subsidies “a sweet deal for banks,” said “working Americans pay while bankers get rich” and singled out Sallie Mae, the largest student lender, for paying executives “hundreds of millions of dollars in the last decade” while middle-class Americans faced crushing college debts.

Anticipating Mr. Duncan’s remarks, a trade group, America’s Student Loan Providers, issued a statement questioning the projected savings. The group said its own proposal, in which subsidies would end but the government would pay a set fee for each loan offered by private firms, would save tens of billions while preserving choice and competition.

But Mr. Duncan said the industry plan would cost taxpayers $13 billion more over 10 years than the administration proposal, and help fewer students. He also said that because of interruptions in private lending during the financial crisis, direct government loans had surged and that about 2,300 colleges and universities now offered such loans, up from 1,000 three years ago.

(New York Times)

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