There's a hideous symmetry to the U.S. House of Representatives' vote to reduce student loan programs and its action to extend tax cuts. It's as though the House set out to burden one generation for another's benefit.
Late last month, the House approved a bill cutting spending on federal programs by $50 billion over a five-year period, including $14.3 billion from student loan subsidies. On Thursday the House approved a $56 billion bill that postpones for two years the expiration of tax cuts on dividends and capital gains.
Treasury Secretary John Snow applauded the tax cuts, saying they would encourage investment and innovation. Too bad he didn't say that making it harder for young people to afford a college education would have precisely the opposite result, slamming doors to well-paid careers and choking the economy's pipeline of brainpower.
The Senate has passed a $36 billion deficit-reduction bill that includes a five-year cut of $15 billion in student loan subsidies, but its proposal would use about half of the savings to pay for new student loan programs for low-income families. The Senate bill is better than the House version, but it's still a big step backward. All cuts in student loan programs should be stripped from deficit-reduction legislation in negotiations to reconcile the House and Senate bills.
College students nationwide would feel the effects of the cuts. Rising tuition, fees and living expenses are forcing the nation's college students and their families to take on heavy debt loads. The House plan would increase the average student borrower's debt by 33 percent to $23,400, according to the U.S. Student Association. If Congress' aim is to price a college education out of the reach of the middle class, this is the way to do it.
Any savings achieved through student loan cuts today would vanish in the future. According to the Oregon University System, the average college graduate earns $41,600 a year, compared to $28,800 for a person with a high school diploma. Over a lifetime, the taxes collected on that difference more than compensate the taxpayers for loan subsidies. A serious concern for long-term deficit reduction would lead Congress to spend more, not less, on student loan programs.
The House legislation features a further outrage: It punishes the most efficient student loan program for the benefit of the financial services industry. A Congressional Budget Office report found that loans issued directly by the federal government require a smaller subsidy than those issued under a program administered by banks and credit unions. The House bill would increase the fees for direct loans, allowing private lenders to gain a larger share of the market - at a greater expense to taxpayers.
A separate CBO analysis found that the government could save $17 billion over 10 years by increasing the direct student loan program's share of the market to 45 percent from its current 25 percent. Instead, the House proposes moving in the other direction. A cynic might conclude that the profits of financial services companies matter more to the House than ensuring students' access to college or getting the best deal for the taxpayers.
This is no way to serve the people, manage public finance or build a secure future. Congress should come to its senses and reject the cuts in student aid. If it won't, the reductions would make a perfect target for President Bush's first veto.
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|Title Annotation:||Editorials; Reducing student loans won't yield savings|
|Publication:||The Register-Guard (Eugene, OR)|
|Date:||Dec 11, 2005|
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