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"House Republicans Appear Divided on Student-Loan Consolidation," The Chronicle of Higher Education, July 23, 2003, online.
By WILL POTTER
WASHINGTON — The chairman of a House of Representatives education subcommittee said Tuesday that a program that permits borrowers to consolidate their loans had strayed from its intent, and that any expansion of the program would hurt future students. But Republicans at a hearing of the subcommittee did not line up behind the chairman, potentially spelling trouble for his push for changes to the Higher Education Act.
The chairman, Rep. Howard P. (Buck) McKeon, a California Republican, criticized proposals introduced by Democrats in recent weeks that would allow borrowers to consolidate their loans multiple times in order to secure record-low interest rates. Some proposals would also eliminate the "single-lender rule," letting borrowers consolidate with any lender they chose.
Other Republicans on the panel largely sided with Democrats on the issues, saying the proposals would bring much-needed relief to borrowers.
"I wasn't even aware of the problem," said Vernon J. Ehlers, a Republican from Michigan, referring to borrowers' complaint that they could not consolidate their loans more than once. "It certainly makes no sense at all."
But Mr. McKeon said it is not prudent to "continue long-term subsidies for those who have already taken advantage of educational opportunities provided by the Higher Education Act and its many student-aid programs and are now in the work force, reaping the benefits of that education."
He said "reconsolidation," if allowed, would come at the expense of current students, and he said the Higher Education Act, the law that governs most federal student-aid programs, should be amended to tighten the program's policies. Congress is in the process of renewing the law.
What, exactly, are the increased expenses that the government would face? That depends on whom you ask, and their stakes in the debate.
J. Barry Morrow, chief executive officer of Collegiate Funding Services, said the consolidation program had earned the government $1.3-billion, and hurt only major lenders.
"The debate over consolidation loans comes down to whether or not Congress is going to put the best interests of students and their families ahead of the desire by big financial institutions to protect their profits," he said at Tuesday's hearing. Collegiate Funding is a newer lender that specializes in consolidation loans and stands to gain from the changes advocated by Democrats.
But June M. McCormack, an executive vice president of Sallie Mae, said expanding the consolidation program would cost the government more than $15-billion. Sallie Mae, the biggest financer of federal student loans, would lose money if the Democrats' proposed changes were adopted.
The subcommittee also heard from two other House members. Ralph Regula, a Republican from Ohio, and Rosa L. DeLauro, a Democrat from Connecticut, spoke in support of consolidation and said its cost to the federal government would be negligible.
Mr. McKeon sought answers to that question from all the speakers, and he called their answers "nebulous." At one point, he interrupted a battle of numbers between Ms. McCormack and Mr. Morrow to request estimates in writing. "I'm really grappling with this," he said.
