by Jason Delisle
On Thursday, the U.S. House of Representatives Financial Services Committee is set to hold a hearing on auction rate securities -- a broken investment mechanism that non-profit student loan companies have relied on heavily for financing. The hearing is largely the brainchild of Rep. Paul Kanjorski (D-PA), a member of the committee who is using it to gin up support for federal policies to help non-profit lenders. This was evident from Kanjorski's initial press release on the hearing, in which he faulted the Bush Administration for failing to use "its full authority to help non-profit lenders like PHEAA," the primary student loan provider in the Congressman's home state.
Clearly Kanjorski thinks that the way the U.S. Department of Education enacted the Ensuring Continued Access to Student Loans Act (ECASLA), the law Congress passed last spring to help student loan providers weather the credit crunch, did not do enough to help non-profit lenders. We at Higher Ed Watch disagree. Instead, we believe Kanjorski has framed the non-profit lender problem in a dubious manner, and is proposing to solve this "problem," with a series of flawed solutions.
It seems that we have to keep reminding policymakers (and sadly, the media, too) that the one, and only, goal of the federal student loan program is to provide loans to college students that are more generous than those offered in the private market. That's it. So, yes, there would be a problem if students weren't able to get federal loans, which even top industry lobbyist John Dean agrees should be the "litmus test" of whether or not there is a "crisis."
But Kanjorski and many in the media have framed the problem in terms of lenders, not students. Certainly, some nonprofit lenders, including PHEAA, have suspended their lending operations this year because they've had trouble financing loans. This has forced students and colleges to find alternative lenders, but there has not been a breakdown in federal loan availability. Students have been able to borrow all the loans to which they are entitled.
Why the hearing then? It appears that Kanjorski believes that the student loan program is supposed to serve two sets of beneficiaries: students and lenders. By this logic, if non-profit lenders can't make loans, then the program isn't working -- even if students are able to obtain federal loans from other lenders.
Ultimately, we believe Kanjorski is acting for political reasons, not for fear that students are in danger of losing access to aid. After all, this wouldn't be the first time, as Higher Ed Watch has previously reported, that Kanjorski has done the bidding of the student loan industry.
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