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KamaAina

(78,249 posts)
Mon Oct 5, 2015, 04:59 PM Oct 2015

Republican Student Loan Bill Is A Handout To The Loan Industry

http://thinkprogress.org/education/2015/10/05/3708678/republican-senators-student-loan-relief-bill-would-benefit-private-market/

Sen. Kelly Ayotte (R-NH) and Sen. Shelley Moore (R-WV) introduced the Student Loan Relief Act of 2015 on Thursday, which would let borrowers refinance their federal student loans in the private market. The senators argue that if their legislation passed, students would be able to benefit from lower interest rates....

Despite the framing of the legislation as beneficial to students, it’s really the private market that has the most to gain from this bill. This bill would also provide a loan guarantee for refinanced loans. To better understand why Republican lawmakers are pushing for this bill, it’s important to remember that in 2010, The Affordable Care Act contained a reconciliation bill that meant all student loans would originate with the federal government compared to the old system, when 55 percent of those loans originated with banks. The federal government used to pay the banks more than the cost of the loans, which meant the change would actually save taxpayer money.

When the bank-based student loan system ended in 2010, most conservatives opposed efforts to change the system, even though it would cost far less if the government took on those responsibilities. Several institutions that benefitted from the old bank-based system were allowed to become student loan servicers after the change, but this bill would allow them a way back into issuing loans.

Although many large banks left the private student loan market after the financial crisis, plenty of politically connected organizations such as state agency lenders and nonprofits have fought to stay in the market. One example is Granite State Management, a New Hampshire nonprofit organization that does student loan servicing. GSM’s primary income is through its student loan servicing, but they would make much more through issuing loans. GSM’s status as a charitable organization was challenged by the City of Concord in 2013 but the court ultimately held up its status, saying that “servicing and administration of loans is not GSMR’s charitable purpose, but a means to achieve” the purpose of its mission to “providing low cost or alternative financial assistance to eligible students and to parents . . . and of supporting the development of higher education and educational opportunities.”


And when did Shelley Moore-Capito drop the Capito?
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