Knoxville News Sentinel: Sen. Lamar Alexander, Rep. Phil Roe oppose White House's student loan plan

Republicans: Federal takeover of student lending would cost jobs

Posted on March 17, 2010

WASHINGTON - U.S. Sen. Lamar Alexander and other congressional Republicans accused Democrats and the White House on Tuesday of plotting "a government takeover" of college student loans.

"The motto of the Obama administration seems to be, 'If you can find it in the Yellow Pages, the government ought to try to do it,' " said Alexander, R-Maryville.

Republicans are upset over the administration's plan to eliminate a popular student loan program, the Federal Family Education Loan Program. The change would enable the federal government to lend money directly to students.

The White House says the direct-lending approach would save billions of dollars that could be used to provide loans to more students. Republicans, however, argue the switch would limit students' financial options and could result in the loss of thousands of jobs across the country.

Democratic leaders in the U.S. House are planning to put the student loan legislation on the fast track by attaching it to a budget package that will include President Barack Obama's proposed health care reforms.

Alexander, who served as president of the University of Tennessee and as education secretary under former President George H.W. Bush, said direct lending would mean students would no longer be able to choose between the 2,000 private lenders who currently offer student loans.

Private lenders will be replaced "with the equivalent of four call centers," Alexander said, which will make the process of getting a student loan "about as friendly as going to the Department of Motor Vehicles for a driver's license."

Alexander also contended that direct lending would enable the government to overcharge students for their loans. The U.S. Department of Education will borrow money at an interest rate of 2.8 percent, lend it to students at 6.8 percent and spend the difference on new government programs, he said.

U.S. Rep. Phil Roe, R-Johnson City, said he has heard from several major universities in Tennessee, and all of them oppose the administration's plan. He called the proposal "a government grab of student loans."

Republicans said they are researching several parliamentary maneuvers to try to stop Democrats from inserting the student loan proposals into the health care bill.

Private lenders that could be affected by the switch to direct lending include the Knoxville-based Edamerica, which has about two dozen marketing representatives around the country, as well as managers and support staff in Knoxville. An affiliated company, Edfinancial Services, has more than 400 people who work in Knoxville processing student loans.

Michael Collins may be reached at 202-408-2711.