Rep. Joe Pitts: Another Government Takeover

Believe It or Not, Another Government Takeover

By Congressman Joe Pitts

We're all painfully aware of how the government in the past year has dangerously inserted itself into the financial industry, the auto industry, and is now looking to do the same with healthcare. This week, however, we saw another government takeover that received very little press. Legislation passed by the House would effectively make the government the sole lender for students looking to finance their higher education.

H.R. 3221, the Student Aid and Fiscal Responsibility Act, would eliminate the Federal Family Education Loan program which provides almost 75 percent of all student loans. This program has operated for more than 40 years as a source of private capital backed by government guarantees.

In 1993, the Clinton administration created the government-owned and run Direct Loan program to provide student loans. The idea behind the program was to create a non-profit "competitor" in the student loan market. If that idea sounds familiar, it's the same rhetoric many are using to make the case for a government-run, public health insurance plan.

The Direct Loan program is only about 20 percent of the market right now. Since the bill would eliminate FFEL loans on July 1, 2010, the federal government would have to quintuple the amount of loans processed by the Direct Loan program in less than a year. In all likelihood, such a significant change could mean chaos for schools and students.

During a time of recession, this bill will mean employment changes for thousands. Currently, 30,000 Americans jobs — 3,000 in Pennsylvania — are connected to the FFEL program. Should this bill be signed into law, most of these jobs would be lost within the next year. Conversely, the government would have to ramp up hiring at an extraordinary rate. Jobs would be moved from across the country to Washington. The logistical challenges would be daunting.

Despite its name, this bill is far from fiscally responsible. In order to smooth the passage of this bill in the Senate, Democrats are trying to pass it under rules intended for legislation that reduces federal spending. By using a host of budget gimmicks, Democratic leaders have claimed billions of dollars in savings. With the gimmicks removed, the true cost of this bill to the American taxpayer is near $50 billion.

Additionally, the American taxpayer will bear a much greater responsibility for defaulted loans. While private companies have an incentive to make sure loans are paid back, the government can always shuffle losses onto the taxpayer.

Eliminating choices and competition is no way to improve service for students and parents. Currently, students have options and lenders who are responsive and courteous can win more customers. When the government is the only choice, service will slow and bureaucracy will increase.

There is no reason to upset a delicate market that students rely on to fund their education. If loans are not approved in a timely manner, students may not be able to begin school on time.

There is a bipartisan solution to this problem. Just last year, Republicans and Democrats overwhelmingly supported the Ensuring Continued Access to Student Loans Act. Extending this act would maintain access to student loans while saving taxpayers more than $13 billion over the next five years.

This week's debate over student loans has repercussions for healthcare reform. Americans want reform, but they want costs controlled and no more deficit spending. If Democratic leadership is willing to bend the rules to pass this bill, they will certainly do the same with healthcare legislation. We don't want, or need, another government takeover of either student lending or healthcare.

Rep. Joe Pitts represents Pennsylvania's 16th Congressional District in Berks, Chester and Lancaster counties.