Story originally printed in the Tomah Journal or online at www.tomahjournal.com

Published - Thursday, February 01, 2007

Editorial: Petri, not Democrats, offers progressive plan for student loans

The Democrats’ first 100 hours as the new majority are less than they seem.

Take, for example, student loans. Democrats had a chance to overhaul an expensive system of student loans channeled through private lenders. Instead of passing real reform, however, Democrats arbitrarily cut interest rates and left a bad program intact.

There’s a better way, and a Republican Congressman who used to represent Tomah appears to be the only politician in America who gets it right.

Representative Tom Petri (R-Fond du Lac), who represented eastern Monroe County until the 2000 redistricting, is a champion of the Direct Student Loan Program, where the federal government loans money directly to students who meet certain income guidelines. Unfortunately, the program runs side-by-side with the Family Education Loan program, in which private lenders make loans that are guaranteed by the federal government.

FFEL is promoted as the “private-sector” alternative to government lending, but FFEL hardly operates under private-sector rules. Absent from the FFEL program is that most basic of private-sector principles: risk. Since the government guarantees every loan, FFEL rakes in guaranteed profits and has no incentive to efficiently manage its loan portfolio. As Petri explains it:

“FFEL is so heavily subsidized and protected from risk that the providers actually function as semi-public bureaucracies. It’s mainly their profits and lobbying which still resemble the private sector.”

It’s Petri, and not House Speaker Nancy Pelosi or the Democratic leadership, who has the real progressive vision of student loans. Petri offers two alternatives that Democrats should readily embrace:

*The Student Aid Reward Act, which encourages colleges and universities to voluntarily participate in the more cost-effective direct loan program and allows them to apply the savings toward additional Pell Grants. Petri estimates Pell Grants could rise by $800 million and still leave $3 billion in taxpayer savings.

*The Income-Dependent Education Assistance Idea Act, which creates an income-contingent loan repayment plan with direct IRS collection. Petri believes it would greatly help students manage their debt loads after graduation.

Stockholders and bureaucrats who benefit from FFEL will use their lobbying muscle to kill these plans, but Petri can win this battle with vocal bi-partisan support (Ron Kind would be a good start). If Democrats are sincere about taking on special interests, they’ll reach across party lines to support innovative ideas that benefit both students and taxpayers.

Democrats, your 100 hours are over. Now pass real reforms.

All stories copyright 2006 Tomah Journal and other attributed sources.