Banks Reap Billions from Student Loan Program Loophole...UPDATE: House Votes to Curb Subsidies

conjur

No Lifer
Jun 7, 2001
58,686
3
0
UPDATE 10/09/04
http://www.nytimes.com/2004/10/08/national/08loan.html

http://www.nytimes.com/2004/08/27/business/27loan.html
More than a decade ago, Congress decided it was giving away too much to the student loan industry, needlessly guaranteeing big profits at taxpayer expense. So lawmakers put their collective feet down, passing a law that gradually erased hundreds of millions of dollars in subsidies that could have gone directly to students instead.

Or so they thought.

Today, lenders are collecting a record amount of the old subsidies Congress thought it had retired, government data show, and they are busily stepping up the pace. Taking advantage of a loophole in the law, student loan companies have been billing the federal government at the rate of nearly $1 billion a year, at least four times the amount just three years ago - all for a subsidy that was supposed to have largely faded away.

"The banks are obviously making an all-out effort to milk the loophole for as big a subsidy as possible," said Senator Edward M. Kennedy, the Massachusetts Democrat who tried to rein in the lender payments more than a decade ago, only to watch them grow. "Every penny of this unnecessary subsidy should be helping needy students struggling to pay for college."

Even some student loan companies say that the large subsidies they are receiving from the government, guaranteeing them 9.5 percent interest rates at a time when students pay much less than that, are hardly the best way of expanding access to college. But until either Congress or the administration closes the loophole promising them higher profits than the market offers on its own, there is little reason for them to stop using it.

"This is the playing field, and we're just playing on it," said Don R. Bouc, the president of Nelnet, one of the nation's largest student loan companies. According to federal records, provided by members of Congress, Nelnet's quarterly payments from the government at the old subsidy rate have gone from about $4.6 million at the end of 2002 to $48.7 million in June.

"Yeah, it's a great return," Mr. Bouc said of the subsidy. "But there are better ways of using the money."

Virtually all parties in the debate, be they Republican or Democrat, say the loopholes should be closed so that the money can benefit students, not bottom lines, but few can agree on whose responsibility it is.


Democrats accuse the Bush administration of tacitly supporting the loopholes by paying the swelling invoices some lenders send them. The Education Department blames the Clinton administration for setting an early precedent that it is merely following today. Congress has a number of proposals before it from each side of the aisle, but has made little headway on the issue - or on most of the other major higher education questions before it - for the better part of a year.

In the meantime, student loan companies like Nelnet are building up huge loan portfolios that carry the old subsidy rate, and may continue to carry them even if the law is changed. At the close of 2002, for example, there were $12 billion in loans guaranteed at the 9.5 percent interest rate, federal data show. Within 18 months, that figure had grown to $17 billion. Nelnet alone accounts for more than $3 billion of the increase.

"It was widely assumed that these loans would gradually decline and eventually disappear," said Terry W. Hartle, a senior vice president for the American Council on Education who worked on the legislation more than a decade ago. "Apparently, it didn't work out that way."

Government payments to student loan companies are not unusual. In fact, they are a cornerstone of the federal financial aid system, enabling companies to offer students unusually low interest rates while still making their profit margins. But throughout the 1980's, some lenders, particularly states and nonprofits, were granted fixed interest rates of 9.5 percent, guaranteed by the government regardless of what students actually paid.

Congress eliminated the guarantee by 1993, eventually moving to a system that is more closely tied to the market, but it allowed some lenders to keep collecting the higher interest rates on money they had already raised. What Congress did not anticipate was that interest rates would fall so low, making the promise of a 9.5 percent return a potential windfall in a market where students are paying less than 3.4 percent in interest on their loans.

Moreover, some of the lenders who originally qualified for the guarantee have been converted into, or have been subsumed by, for-profit companies, putting greater emphasis on the search for profits. In recent years, lenders have begun employing some creative financing tactics to keep the old guarantees alive on entirely new loans, according to a report by the Government Accountability Office. It found that the guarantees have given lenders at least $1.7 billion more in federal subsidies than they might have received otherwise, and most of that has come in the last few years.


More than three dozen lenders, most of them nonprofits, received the higher interest rates last year, the accounting office found, and almost half of them have managed to expand their loan portfolio in recent years, assuring them bigger subsidies. The Southwest Student Services Corporation, for example, a lender that was bought this month by Sallie Mae, the industry giant, more than doubled its holdings to around $650 million worth of loans in the last two years, federal records show.

"Everyone's rushing in before the door closes," said Matthew J. Snowling, an analyst with Friedman, Billings, Ramsey.

Democrats in Congress contend that the Education Department has stood back and let loan companies exploit loopholes giving them access to old subsidies, in part because of the Bush administration's political connections with lenders. Indeed, Mr. Bouc of Nelnet was appointed by the department to serve on a financial aid advisory committee, but the department points out that it is not in favor of these higher subsidies, and has proposed changes that would save billions in its budget for the next fiscal year.

As for closing the loopholes now, while lenders are hurriedly mounting large portfolios, the department said there was little it could do. "I don't think we would want them to do it," Sally Stroup, an assistant secretary of education, said of the rapid increase in new loans with the old guarantees. "But I don't think we have the legal authority to stop them."

Many experts, including some within the department itself, disagree. "It is the agency's rules that created the loopholes," said Robert Shireman, director of the Institute for College Access and Success, which published a report today with findings similar to the G.A.O.'s. "It is the agency's responsibility to fix them. It is irresponsible not to act."

The department says it is anxious for Congress to rewrite the law, soon. Members of Congress are confident a change will come, eventually, but so far the issue has been just one of many tied up in the reauthorization of the Higher Education Act, which expired last year. The process has been highly partisan, inflamed by intense lobbying from loan companies and educators alike, and is nowhere near completion.

Beyond that, Republicans and Democrats differ on how tightly the loopholes should be closed. While Republicans in the House have proposed cutting off the guarantee on loans made after May 2004, Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.

Though rising interest rates will probably decrease the size of the subsidies lenders receive, the delay could still be costly because student loan companies can keep issuing new loans with the old guarantee until the rules are changed, experts say. In its report, for instance, the institute for college access estimates that waiting another year to close the loopholes could cost an extra $2.8 billion in federal subsidies that do not expand college access but siphon away money that could possibly be used for college grants instead.


Good to know Bush is being consistent in his administration by keeping conflict of interest alive and well.
 

NJDevil

Senior member
Jun 10, 2002
952
0
0
Originally posted by: conjur
http://www.nytimes.com/2004/08/27/business/27loan.html
More than a decade ago, Congress decided it was giving away too much to the student loan industry, needlessly guaranteeing big profits at taxpayer expense. So lawmakers put their collective feet down, passing a law that gradually erased hundreds of millions of dollars in subsidies that could have gone directly to students instead.

Or so they thought.

Today, lenders are collecting a record amount of the old subsidies Congress thought it had retired, government data show, and they are busily stepping up the pace. Taking advantage of a loophole in the law, student loan companies have been billing the federal government at the rate of nearly $1 billion a year, at least four times the amount just three years ago - all for a subsidy that was supposed to have largely faded away.

"The banks are obviously making an all-out effort to milk the loophole for as big a subsidy as possible," said Senator Edward M. Kennedy, the Massachusetts Democrat who tried to rein in the lender payments more than a decade ago, only to watch them grow. "Every penny of this unnecessary subsidy should be helping needy students struggling to pay for college."

Even some student loan companies say that the large subsidies they are receiving from the government, guaranteeing them 9.5 percent interest rates at a time when students pay much less than that, are hardly the best way of expanding access to college. But until either Congress or the administration closes the loophole promising them higher profits than the market offers on its own, there is little reason for them to stop using it.

"This is the playing field, and we're just playing on it," said Don R. Bouc, the president of Nelnet, one of the nation's largest student loan companies. According to federal records, provided by members of Congress, Nelnet's quarterly payments from the government at the old subsidy rate have gone from about $4.6 million at the end of 2002 to $48.7 million in June.

"Yeah, it's a great return," Mr. Bouc said of the subsidy. "But there are better ways of using the money."

Virtually all parties in the debate, be they Republican or Democrat, say the loopholes should be closed so that the money can benefit students, not bottom lines, but few can agree on whose responsibility it is.


Democrats accuse the Bush administration of tacitly supporting the loopholes by paying the swelling invoices some lenders send them. The Education Department blames the Clinton administration for setting an early precedent that it is merely following today. Congress has a number of proposals before it from each side of the aisle, but has made little headway on the issue - or on most of the other major higher education questions before it - for the better part of a year.

In the meantime, student loan companies like Nelnet are building up huge loan portfolios that carry the old subsidy rate, and may continue to carry them even if the law is changed. At the close of 2002, for example, there were $12 billion in loans guaranteed at the 9.5 percent interest rate, federal data show. Within 18 months, that figure had grown to $17 billion. Nelnet alone accounts for more than $3 billion of the increase.

"It was widely assumed that these loans would gradually decline and eventually disappear," said Terry W. Hartle, a senior vice president for the American Council on Education who worked on the legislation more than a decade ago. "Apparently, it didn't work out that way."

Government payments to student loan companies are not unusual. In fact, they are a cornerstone of the federal financial aid system, enabling companies to offer students unusually low interest rates while still making their profit margins. But throughout the 1980's, some lenders, particularly states and nonprofits, were granted fixed interest rates of 9.5 percent, guaranteed by the government regardless of what students actually paid.

Congress eliminated the guarantee by 1993, eventually moving to a system that is more closely tied to the market, but it allowed some lenders to keep collecting the higher interest rates on money they had already raised. What Congress did not anticipate was that interest rates would fall so low, making the promise of a 9.5 percent return a potential windfall in a market where students are paying less than 3.4 percent in interest on their loans.

Moreover, some of the lenders who originally qualified for the guarantee have been converted into, or have been subsumed by, for-profit companies, putting greater emphasis on the search for profits. In recent years, lenders have begun employing some creative financing tactics to keep the old guarantees alive on entirely new loans, according to a report by the Government Accountability Office. It found that the guarantees have given lenders at least $1.7 billion more in federal subsidies than they might have received otherwise, and most of that has come in the last few years.


More than three dozen lenders, most of them nonprofits, received the higher interest rates last year, the accounting office found, and almost half of them have managed to expand their loan portfolio in recent years, assuring them bigger subsidies. The Southwest Student Services Corporation, for example, a lender that was bought this month by Sallie Mae, the industry giant, more than doubled its holdings to around $650 million worth of loans in the last two years, federal records show.

"Everyone's rushing in before the door closes," said Matthew J. Snowling, an analyst with Friedman, Billings, Ramsey.

Democrats in Congress contend that the Education Department has stood back and let loan companies exploit loopholes giving them access to old subsidies, in part because of the Bush administration's political connections with lenders. Indeed, Mr. Bouc of Nelnet was appointed by the department to serve on a financial aid advisory committee, but the department points out that it is not in favor of these higher subsidies, and has proposed changes that would save billions in its budget for the next fiscal year.

As for closing the loopholes now, while lenders are hurriedly mounting large portfolios, the department said there was little it could do. "I don't think we would want them to do it," Sally Stroup, an assistant secretary of education, said of the rapid increase in new loans with the old guarantees. "But I don't think we have the legal authority to stop them."

Many experts, including some within the department itself, disagree. "It is the agency's rules that created the loopholes," said Robert Shireman, director of the Institute for College Access and Success, which published a report today with findings similar to the G.A.O.'s. "It is the agency's responsibility to fix them. It is irresponsible not to act."

The department says it is anxious for Congress to rewrite the law, soon. Members of Congress are confident a change will come, eventually, but so far the issue has been just one of many tied up in the reauthorization of the Higher Education Act, which expired last year. The process has been highly partisan, inflamed by intense lobbying from loan companies and educators alike, and is nowhere near completion.

Beyond that, Republicans and Democrats differ on how tightly the loopholes should be closed. While Republicans in the House have proposed cutting off the guarantee on loans made after May 2004, Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.

Though rising interest rates will probably decrease the size of the subsidies lenders receive, the delay could still be costly because student loan companies can keep issuing new loans with the old guarantee until the rules are changed, experts say. In its report, for instance, the institute for college access estimates that waiting another year to close the loopholes could cost an extra $2.8 billion in federal subsidies that do not expand college access but siphon away money that could possibly be used for college grants instead.


Good to know Bush is being consistent in his administration by keeping conflict of interest alive and well.


I don't think this is something anyone would really have noticed. It's crazy, and as a college student who gets 10k in loans a year (entering second year and have 20k loans) I am really upset with this, but blaming this on Bush? Come on. I am not voting for him and really dislike his policies, but I'm not naive enough to blame every single problem on him. That's madness.
 

conjur

No Lifer
Jun 7, 2001
58,686
3
0
Bush appointed Paige...Paige appointed Bouc...see the connection? Do you honestly think this administration isn't appointing people to key positions who stand to gain via their connections in the corporate world? I don't think there's a Cabinet position where that's not true.

And...notice this chart

Payments have doubled in less than 2 years. I wish that chart showed numbers back a couple more years. Bouc was appointed around the beginning of 2002, I believe.

edit: http://www.nelnetinvestors.net/ReleaseDetail.cfm?ReleaseID=122378&reltype=General

Looks like he was appointed 11/29/01...looks like it took him about a year to work on increasing payments to Nelnet by a magnitude of 10.
 

chess9

Elite member
Apr 15, 2000
7,748
0
0
Conjur:

If Bush can change the overtime rules, he can change these rules. :)

On the other hand, what will happen to the student loan program if these subsidies dry up?

I may have to go to student loans for my daughter, so my interest is not entirely academic.

-Robert
 

conjur

No Lifer
Jun 7, 2001
58,686
3
0
Originally posted by: chess9
Conjur:

If Bush can change the overtime rules, he can change these rules. :)

On the other hand, what will happen to the student loan program if these subsidies dry up?

I may have to go to student loans for my daughter, so my interest is not entirely academic.

-Robert
It's not about removing the subsidies, it's about correcting the disparity in the amounts paid. The lenders are getting 9.5% on money loaned out at 3.4% (or thereabouts). The lenders are double-dipping: making money from the students paying back their loans and making money from the government in the form of much higher interest payments.
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
102,414
8,356
126
Originally posted by: conjur\


Good to know Bush is being consistent in his administration by keeping conflict of interest alive and well.

it said that the practice started under the clinton admin... but that must be ok, and only bush is evil! :roll:

[While Republicans in the House have proposed cutting off the guarantee on loans made after May 2004, Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.
seems like the democrats don't want to cut off as many companies here. just the ones that have built large portfolios off of it.
 

conjur

No Lifer
Jun 7, 2001
58,686
3
0
Originally posted by: ElFenix
Originally posted by: conjur\


Good to know Bush is being consistent in his administration by keeping conflict of interest alive and well.

it said that the practice started under the clinton admin... but that must be ok, and only bush is evil! :roll:
That makes it ok to continue doing it? And, notice how the payments skyrocketed after Buoc was appointed? And, what were the interest rates under Clinton versus interest rates now?

Hmmmmm....

[While Republicans in the House have proposed cutting off the guarantee on loans made after May 2004, Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.
seems like the democrats don't want to cut off as many companies here. just the ones that have built large portfolios off of it.
Methinks you're misreading the Democrats' stance.
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
102,414
8,356
126
Originally posted by: conjur
Originally posted by: ElFenix
Originally posted by: conjur\


Good to know Bush is being consistent in his administration by keeping conflict of interest alive and well.

it said that the practice started under the clinton admin... but that must be ok, and only bush is evil! :roll:
That makes it ok to continue doing it? And, notice how the payments skyrocketed after Buoc was appointed? And, what were the interest rates under Clinton versus interest rates now?

Hmmmmm....
oh so just because it wasn't as big means it was ok! and it isn't like the executive branch can just change the law on its own, or maybe you didn't pay attention in governmnet 101. :roll:
[While Republicans in the House have proposed cutting off the guarantee on loans made after May 2004, Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.
seems like the democrats don't want to cut off as many companies here. just the ones that have built large portfolios off of it.
Methinks you're misreading the Democrats' stance.
it says 'to any company that ... buil[t] large loan portfolios' not to all. you tell me if it says something different.
 

Train

Lifer
Jun 22, 2000
13,861
68
91
www.bing.com
just goes to show subsidies are only a short term solution, every time the govt tries to subsidize something, within a few years all the benificiaries have adapted to rape it for all its worth. Govt subsidizations should have an expiration date, or at least an exit plan to ween off the benificiaries.
 

conjur

No Lifer
Jun 7, 2001
58,686
3
0
Originally posted by: ElFenix
Originally posted by: conjur
Originally posted by: ElFenix
it said that the practice started under the clinton admin... but that must be ok, and only bush is evil! :roll:
That makes it ok to continue doing it? And, notice how the payments skyrocketed after Buoc was appointed? And, what were the interest rates under Clinton versus interest rates now?

Hmmmmm....
oh so just because it wasn't as big means it was ok! and it isn't like the executive branch can just change the law on its own, or maybe you didn't pay attention in governmnet 101. :roll:
Why not answer my questions?

[While Republicans in the House have proposed cutting off the guarantee on loans made after May 2004, Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.
seems like the democrats don't want to cut off as many companies here. just the ones that have built large portfolios off of it.
Methinks you're misreading the Democrats' stance.
it says 'to any company that ... buil[t] large loan portfolios' not to all. you tell me if it says something different.
Perhaps the writer is meaning to imply that all companies that have taken advantage of the loophole have ended up with large portfolios. Is there mention of a cutoff value? $1? $10,000? $1,000,000? No. You're reading more than is there.
 

conjur

No Lifer
Jun 7, 2001
58,686
3
0
Originally posted by: chess9
Conjur:

Isn't Congress thinking about cutting out the subsidies?

-Robert

They eliminated the guarantee of 9.5% interest but have continued to pay that thru these loopholes. The change was to tie the interest to the market.
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
102,414
8,356
126
Originally posted by: conjur
Originally posted by: ElFenix
Originally posted by: conjur
Originally posted by: ElFenix
it said that the practice started under the clinton admin... but that must be ok, and only bush is evil! :roll:
That makes it ok to continue doing it? And, notice how the payments skyrocketed after Buoc was appointed? And, what were the interest rates under Clinton versus interest rates now?

Hmmmmm....
oh so just because it wasn't as big means it was ok! and it isn't like the executive branch can just change the law on its own, or maybe you didn't pay attention in governmnet 101. :roll:
Why not answer my questions?
the interest rate nosedived so the difference is much bigger? for profit companies started getting in on the action? and again, since it is THE LAW they can't just stop.

[While Republicans in the House have proposed cutting off the guarantee on loans made after May 2004, Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.
seems like the democrats don't want to cut off as many companies here. just the ones that have built large portfolios off of it.
Methinks you're misreading the Democrats' stance.
it says 'to any company that ... buil[t] large loan portfolios' not to all. you tell me if it says something different.
Perhaps the writer is meaning to imply that all companies that have taken advantage of the loophole have ended up with large portfolios. Is there mention of a cutoff value? $1? $10,000? $1,000,000? No. You're reading more than is there.
wtf are you talking about?
Senate Democrats say the government should refuse paying the high subsidies to any company that has used the loopholes to build large loan portfolios over the last few years, and possibly even before that.
did you even read that sentence? are we reading the same thing here?
 

AndrewR

Lifer
Oct 9, 1999
11,157
0
0
Originally posted by: conjur

Payments have doubled in less than 2 years.

And when did the interest rates start falling? You are so anti-Bush that you can't even make an argument that accounts for facts. This misguided policy was put into place by Clinton, who pegged the interest rate at 9.5% so it's the current administration's fault. You're brilliant, you know?

Here's a monthyl list of the bank loan prime rate starting at the beginning of 2001. Notice a decline from 9.05% to 4.00%?

2001 01 9.05 -5.40 0.55
2001 02 8.50 -6.60 -0.23
2001 03 8.32 -2.16 -0.51
2001 04 7.80 -6.24 -1.20
2001 05 7.24 -6.72 -2.00
2001 06 6.98 -3.12 -2.52
2001 07 6.75 -2.76 -2.75
2001 08 6.67 -0.96 -2.83
2001 09 6.28 -4.68 -3.22
2001 10 5.53 -9.00 -3.97
2001 11 5.10 -5.16 -4.40
2001 12 4.84 -3.12 -4.66
2002 01 4.75 -1.08 -4.30
2002 02 4.75 0.00 -3.75
2002 03 4.75 0.00 -3.57
2002 04 4.75 0.00 -3.05
2002 05 4.75 0.00 -2.49
2002 06 4.75 0.00 -2.23
2002 07 4.75 0.00 -2.00
2002 08 4.75 0.00 -1.92
2002 09 4.75 0.00 -1.53
2002 10 4.75 0.00 -0.78
2002 11 4.35 -4.80 -0.75
2002 12 4.25 -1.20 -0.59
2003 01 4.25 0.00 -0.50
2003 02 4.25 0.00 -0.50
2003 03 4.25 0.00 -0.50
2003 04 4.25 0.00 -0.50
2003 05 4.25 0.00 -0.50
2003 06 4.22 -0.36 -0.53
2003 07 4.00 -2.64 -0.75
2003 08 4.00 0.00 -0.75
2003 09 4.00 0.00 -0.75
2003 10 4.00 0.00 -0.75
2003 11 4.00 0.00 -0.35
2003 12 4.00 0.00 -0.25
2004 01 4.00 0.00 -0.25
2004 02 4.00 0.00 -0.25
2004 03 4.00 0.00 -0.25
2004 04 4.00 0.00 -0.25
2004 05 4.00 0.00 -0.25
2004 06 4.00 0.00 -0.22
2004 07 4.25 3.00 0.25
 

conjur

No Lifer
Jun 7, 2001
58,686
3
0
Originally posted by: AndrewR
Originally posted by: conjur

Payments have doubled in less than 2 years.

And when did the interest rates start falling? You are so anti-Bush that you can't even make an argument that accounts for facts. This misguided policy was put into place by Clinton, who pegged the interest rate at 9.5% so it's the current administration's fault. You're brilliant, you know?

Here's a monthyl list of the bank loan prime rate starting at the beginning of 2001. Notice a decline from 9.05% to 4.00%?

2001 01 9.05 -5.40 0.55
2001 02 8.50 -6.60 -0.23
2001 03 8.32 -2.16 -0.51
2001 04 7.80 -6.24 -1.20
2001 05 7.24 -6.72 -2.00
2001 06 6.98 -3.12 -2.52
2001 07 6.75 -2.76 -2.75
2001 08 6.67 -0.96 -2.83
2001 09 6.28 -4.68 -3.22
2001 10 5.53 -9.00 -3.97
2001 11 5.10 -5.16 -4.40
2001 12 4.84 -3.12 -4.66
2002 01 4.75 -1.08 -4.30
2002 02 4.75 0.00 -3.75
2002 03 4.75 0.00 -3.57
2002 04 4.75 0.00 -3.05
2002 05 4.75 0.00 -2.49
2002 06 4.75 0.00 -2.23
2002 07 4.75 0.00 -2.00
2002 08 4.75 0.00 -1.92
2002 09 4.75 0.00 -1.53
2002 10 4.75 0.00 -0.78
2002 11 4.35 -4.80 -0.75
2002 12 4.25 -1.20 -0.59
2003 01 4.25 0.00 -0.50
2003 02 4.25 0.00 -0.50
2003 03 4.25 0.00 -0.50
2003 04 4.25 0.00 -0.50
2003 05 4.25 0.00 -0.50
2003 06 4.22 -0.36 -0.53
2003 07 4.00 -2.64 -0.75
2003 08 4.00 0.00 -0.75
2003 09 4.00 0.00 -0.75
2003 10 4.00 0.00 -0.75
2003 11 4.00 0.00 -0.35
2003 12 4.00 0.00 -0.25
2004 01 4.00 0.00 -0.25
2004 02 4.00 0.00 -0.25
2004 03 4.00 0.00 -0.25
2004 04 4.00 0.00 -0.25
2004 05 4.00 0.00 -0.25
2004 06 4.00 0.00 -0.22
2004 07 4.25 3.00 0.25

Thank you for proving my point!

The rates started falling under the Bush administration. Did they do anything to hem the flow of cash to the lenders? No. In fact, they all but encouraged even more companies to take advantage of the loophole.

Beautiful.
 

AndrewR

Lifer
Oct 9, 1999
11,157
0
0
Thank you for proving my point!

The rates started falling under the Bush administration. Did they do anything to hem the flow of cash to the lenders? No. In fact, they all but encouraged even more companies to take advantage of the loophole.

Beautiful.

Answer one question: Who set the policy for keeping the rate at 9.5%? A one word response is adequate.
 

conjur

No Lifer
Jun 7, 2001
58,686
3
0
House Votes to Curb Subsidies Paid to Student Loan Companies
http://www.nytimes.com/2004/10/08/national/08loan.html
The House unanimously passed a bill yesterday to close loopholes that allow student loan companies to collect hundreds of millions of dollars in subsidies, and the Senate was expected to do the same as early as today.

After months of debate on the issue, the House settled on a bill that would use the money to help teachers instead of student loan companies. By some estimates, it could generate as much as $270 million in savings, to be used to help pay off the student loans of math, science and special education teachers who commit to working in schools with low-income students.

For all the support for the legislation, introduced by Republican leaders at the tail end of the session, the dispute over the government subsidies appeared far from finished. Even as they voted for it, some Democratic members of Congress contended that the legislation only partly closed the loopholes that have enabled lenders to collect well over $1 billion in subsidies.

The bill is a stopgap measure to hamper the growth of a subsidy Congress tried to eliminate more than a decade ago. Because of loopholes, lenders are able to collect 9.5 percent interest on huge loan portfolios, even though prevailing rates have dropped and students now are paying only about 3.4 percent. The government makes up the difference.

The bill closes at least some of these loopholes, but only for a year, while Congress takes on the task of essentially rewriting many of the nation's higher education laws. And it does not close all of them, leading many lawmakers to worry that student loan companies will simply change their strategy and take advantage of the options left open to them.

Complaints of waste and abuse expressed by experts inside and outside the Department of Education have led to an audit of the loan program by the department's inspector general.

Some department staff members also say that employees who are normally part of the approval process have been excluded from the decision to continue paying student lenders big subsidies even as concerns over their legitimacy have been raised.

The nonpartisan Government Accountability Office reported last month that the department had the power to cut off the subsidies, but had chosen not to use it.

The department has disputed that finding, and Rod Paige, the education secretary, applauded the House vote yesterday, describing the action as "the right - and only - way to go to immediately address the problem."

At least they finally got around to fixing the problem.