House Education Committee Chairman Open to Alternative Student Loan Reform Plans

The chairman of the U.S. House Committee on Education and Labor indicated that the committee is seriously considering alternative student loan reform plans. During a hearing on “Increasing Student Aid Through Loan Reform,” Chairman George Miller, D-Calif., said that the panel has requested cost estimates of alternatives to the Obama administration’s proposal to eliminate the Federal Family Education Loan Program in favor of direct loans and to use the projected savings to dramatically increase Pell Grant funding.

“There has been a suggestion that this is all a done deal. This is a very big, important question. We are moving away from a system that in many ways worked very well,” Miller said.

Miller said the any workable student loan reform plan had to meet two basic benchmarks: increase the efficiency of the loan program to allow increased investment in grant aid and increase the reliability of the funding for federal loans.

The committee heard suggestions from three members of the FFELP community for alternative loan program reforms.

Jack Remondi, vice chairman and chief financial officer for Sallie Mae, said that Sallie Mae supports the administration’s objectives of increasing Pell Grant funding but proposes improvements to the administration’s student loan proposal.

“Our suggested modification to the administration’s proposal authorizes lenders to originate the loans for the government, with government capital, on a fee-for-service basis — ending lender subsidies altogether,” Remondi said.

Chris Chapman, president and CEO of Access Group, pointed to the currently operating student loan asset-backed commercial paper conduit as a workable model for reform. Chapman noted that the conduit can provide reliable financing of future FFELP loan originations and reduce program costs. “There is tremendous value in a system that enables a diverse array of student loan providers to continue to finance, originate and service federal student loans in a manner that maintains the long-standing productive partnerships forged over time,” Chapman said.

René Drouin, president and CEO of the New Hampshire Higher Education Assistance Foundation Network Organizations, described a student loan model that preserves the benefits of a local student loan service provider. “To suggest, as the president’s 2010 budget does, that the federal government, or its big contractor located outside of New Hampshire, could do a better job of supporting New Hampshire college students, their schools and their parents is unimaginable,” Drouin said.

The House panel and its Senate counterpart are required by the 2010 budget resolution adopted by Congress to find $1 billion in budget savings, and Miller has said the savings will come through student loan program reform.

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