KAI RYSSDAL: With more students borrowing more money to pay higher tuition bills, student loans have become an $85 billion industry in this country. And where there’s that much money on the line, there’s always the opportunity for problems.
CIT Group announced today the top three officials at its Student Loan Xpress subsidiary are going to be taking some time off — with pay. New York Attorney General Andrew Cuomo is looking into possible kickbacks. He’s investigating financial ties between lenders and aid officials at several universities, as well as at the U.S. Department of Education. He’s already issued a basketful of subpoenas, to CIT Group and others. And Congress is promising it’s own investigation.
Commentator Jeff Birnbaum says this might be one area where bipartisanship could actually happen.
JEFF BIRNBAUM: Of all the industries under attack on Capitol Hill — and there are plenty of them — the business of providing student loans is perhaps the most endangered.
The private student loan industry and its leading company, Sallie Mae, are battling against congressional Democrats and President Bush — both of whom would like to pare back the lenders’ sizable federal benefits.
The private student loan industry in general, and Sallie Mae in particular, has never been popular with Democrats. Democratic policymakers see the billion-dollar subsidies that go to student lenders as a terrible waste. They’ve said for years that they’d prefer to take for-profit companies out of the market and encourage student lending directly from Uncle Sam.
But this year, in a surprise, Bush broke with the GOP’s unwavering support of private lending to students and sided with the Democrats.
Republicans have backed the “private sector” in many areas, including this one. But the president’s budget proposal to Congress in February recommended reducing federal subsidies to private lenders, and increasing some of their fees, for a total savings of $19 billion over five years. That’s a bigger bite than even Democrats were considering.
Why? Well, it seems that both parties have decided that private lenders have been too rich for too long. Executives at places like Sallie Mae have been pulling in millions of dollars a year. In fact, Sallie’s chairman, Albert Lord, sold $18 million of company stock just days before Bush proposed the subsidy cuts that caused Sallie Mae’s shares to drop.
On top of that, investigations are underway about private lenders lining the pockets of student loan officers to get preferential treatment.
Without question, private lending of student loans is about to change, and it seems that everyone agrees that it’s well past time for that to happen.
RYSSDAL: Jeff Birnbaum is a columnist for The Washington Post.
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