The Hill reported today that student loan companies are “mounting a final push to keep an overhaul of the industry embraced by the Obama administration and congressional Democrats out of the larger healthcare reform package.” The Student Aid and Fiscal Responsibility Act (SAFRA) was passed by the House last year, and is currently included in the reconciliation package that both chambers are crafting to get health care reform across the finish line.
SAFRA would cut billions of dollars in corporate welfare by ending the subsidies that private loan companies currently receive to originate student loans. Instead, origination would be done directly by the government, with the loans serviced by private companies. But the current setup is a sweet deal for the lenders — as they receive taxpayer dollars to act as middlemen between the government and students — so they are fighting hard to keep it in place, led by the lobbying machine of Sallie Mae.
One of their main arguments is that ending subsidies will be a job killer. (In fact, Sallie Mae CFO John Remondi has said that the Center for American Progress team inappropriately scoffs at the job loss that will occur if SAFRA passes). Yesterday, in the House Budget Committee’s markup of the reconciliation bill, opponents of SAFRA in both parties seized on this line of reasoning:
Rep. Greg Harper (R-MS): I think schools would prefer to have private companies provide guaranteed loans…If we eliminate the current guaranteed lending program, you will see tens of thousands of jobs lost in the private sector.
Rep. Allen Boyd (D-FL): The implementation of this switch to direct lending could prove detrimental to thousands of employees that serve in the current student loan industry throughout the country. I’ll have to confess that about 700 of those are in the district that I happen to represent, employed by Sallie Mae.
A spokesman for House Minority Leader John Boehner (R-OH) jumped on the bandwagon today as well, writing that the “government takeover” of student lending would “eliminate choice, competition, and innovation from student lending – while killing jobs (up to 35,000 in all 50 states).”
This is all fearmongering that has little basis in reality. For starters, Boehner’s 35,000 number represents literally every student lending job in the country. For that much job loss to occur, every single position at every single company would have to vanish. No one seriously thinks that will happen.
In fact, under SAFRA, student loan companies will have to build up the servicing portion of their business, to meet growing loan demand. Sallie Mae has already brought servicing jobs back to the United States from overseas in anticipation of this. So while it’s possible that some jobs at these companies may disappear, it won’t be nearly as many as SAFRA opponents claim. Plus, as Pedro de la Torre pointed out, outside of the lenders, “SAFRA will probably be a net job creator”:
In addition to providing more financial aid to students, the bill invests billions in school construction and modernization, grants for programs to increase college access and completion, early learning programs, community colleges, minority-serving institutions and more. These investments will save and create jobs across the country.
In light of all this, let’s recognize the congressmen’s statements for what they are: a defense of wasting taxpayer money on loan companies that add no value to the educational experience.