It's hard to tell whether the House of Representatives' overwhelming passage Wednesday of legislation to toughen federal law governing the student loan industry shows how much the political landscape surrounding the issue has changed -- or, in the long run, how little.
On the one hand, the idea that all but three House Republicans would support a bill that significantly restricts the behavior of lenders would have seemed all but unfathomable a year ago, given the symbiotic relationship that many GOP lawmakers have had with student loan companies in recent years and the Republican-led Congress's unflagging support for the government's guaranteed student loan program. In that way, it is clear that the combination of the Democratic takeover of Congress last fall and, more significantly, the spate of revelations and allegations about lender (and college) wrongdoing in recent months have altered the environment.
But while the 414-3 vote in favor of the Student Loan Sunshine Act (H.R. 890) might be seen as indicating that Congressional Democrats and Republicans see eye to eye on the problems in the federal student loan programs and solutions to them, Wednesday's debate about the bill suggests that the parties still see the underlying issues of the student loan programs very differently, and that big fights are still to come if -- as is expected -- Congressional Democrats press more significant structural changes to the loan programs down the road.
Two hundred twenty Democrats (with 11 not voting) voted Yes on the student loan bill, as did 194 Republicans, with three GOP lawmakers voting No and four not voting. The legislation had been co-drafted by the chairman of the House Education and Labor Committee, Rep. George Miller (D-Calif.), and by the committee's senior Republican, Rep. Howard P. (Buck) McKeon (R-Calif.), and the measure reflected a clear compromise between the Student Loan Sunshine Act that Miller and other Democrats introduced last winter, and the Financial Aid Accountability and Transparency Act (H.R 1994) that McKeon introduced last month.
Among other things, the legislation (a copy of which can be viewed here) would:
- Ban all gifts from lenders to campus officials, revenue-sharing agreements between lenders and colleges, and college administrators' participation on lenders' advisory boards.
- Require institutions to disclose all relationships with lenders.
- Allow “preferred lender lists” on campuses with strict assurances that the list was created with the students’ best interests in mind.
- Prohibit staffing of campus financial aid offices by lenders or their employees.
That McKeon -- and even Rep. John Boehner (R-Ohio), who as chairman of the House's education committee famously told student loan officials in 2005 that he had "all of you in my two trusted hands" -- voted for the bill shows in one way how far the ball has been moved by the interlocking investigations conducted by Miller and Sen. Edward M. Kennedy (D-Mass.) in Congress and by Andrew M. Cuomo, New York's attorney general, among others. (Along those lines, Miller announced Wednesday that his inquiry had uncovered evidence that JPMorgan Chase had hired five campus officials as consultants while they remained on their own institutions' payrolls. He also criticized a $70,000 cruise around Manhattan to which the lender treated campus aid officials at a meeting of the National Association of Student Financial Aid Administrators.) The steady stream of charges and findings about questionable if not illegal behavior by some lenders and campus financial aid officials have made it politically impossible to oppose the idea that there are problems in the student loan industry that need addressing.
"Some of the lenders have crossed the line or gotten to close to the line, as with some of the financial aid officers," McKeon said during the very short debate about the bill on the House floor Wednesday. The bill, he said, "is about protecting the interests of millions of young men and women who expect our student aid system to be there for them when they need it."
But even as McKeon and other Republicans voted to restrict the behavior of lenders, they said it was crucial that Congress not go too far. "As we move forward from here, we must not lose sight of the fact that the federal financial aid system must work for students and colleges alike," McKeon said. "We must be careful not to overreach, as Congress does all too often, but we do need to reaffirm trust in the system. I believe this bill does just that."
The implication from McKeon and his colleagues was that the bill passed Wednesday will largely do the trick in cleaning up the student loan programs. And while Miller and other Democrats credited Republicans for embracing the legislation and joined their colleagues across the aisle in praising the measure, they also made clear, in their comments on the House floor, that they viewed it as only the beginning of their efforts to transform the federal student loan programs.
They also signaled -- as if there were any doubt, as Education Secretary Margaret Spellings prepared to testify this morning before the House education committee -- that they blamed the Bush administration for letting many of the problems develop.
"The reason we guarantee these loans is to try to drive this money to the students and their families at the lowest possible cost so they can afford to go to college," Miller said as he spoke with rising passion on the House floor. "That's the public purpose, and now that public purpose has absolutely been prostituted by the Department of Education, by many of the lenders, by many of the colleges and many of the personnel that work for them."
Rep. Rahm Emanuel (D-Ill.), chairman of the House Democratic Caucus, said his party is "not done in cleaning up the mess as it relates to the college loan industry," adding: "This is an industry that needs a whole top-to-bottom cleaning and a washing."
Various pieces of legislation that Democrats have introduced or promised to introduce since taking control of Congress this year would make much bigger changes to the federal loan programs than restricting the relationships between lenders and colleges and opening the door to federal regulation of the private loan industry, as the measure passed Wednesday would do. They would impose structural changes that could meaningfully affect the profitability of lenders, not just altering how they market their products.
Leaders in the Senate are weighing tens of billions of dollars in cuts to the subsidies that the government pays to lenders, guarantors and other student loan entities, as well as considering proposals that would lead to lenders having to compete at auction for the right to provide federal loans. Some House Democrats, meanwhile, are continuing to promote legislation that Republicans turned away last year that would provide incentives to colleges that leave the Family Federal Education Loan Program (the one populated by lenders) for the government's competing direct loan program. Democrats and Republicans have sparred frequently over the years about the relative costs and general merits of the two loan programs, with Democrats largely supporting the direct loan program and Republicans championing the lender-based program.
While Democrats did not specifically mention those efforts Wednesday as they talked of more changes to come, Republicans did -- in a discouraging way. "This isn't about us versus the lenders or us versus the financial aid officers, and this isn't about direct loans versus the market-based FFEL program," McKeon said during the floor debate, adding, "for the record," that he continued to support the guaranteed loan program.
Praise for the passage of the House bill -- and especially the bipartisan support for it -- poured in from many directions, with statements offered by other members of Congress, from New York's Cuomo, from some college associations and, notably, from groups of lenders.
"America’s Student Loan Providers feels strongly that Congress should act quickly to pass legislation that will help bring more transparency to the financial aid process and that the House’s passage of H.R. 890, the Student Loan Sunshine Act, is an important step by Congress in crafting legislation that will strengthen the public’s trust in federal student loans," one such group, America's Student Loan Providers, said in a prepared statement.
“The central tenets of the bill passed today, coupled with initiatives already underway by many of our members, will help guide student loan marketing so that questionable practices are eliminated. We’re hopeful that Congress will work with the student loan community and other stakeholders to perfect the bill so that the transparency it achieves ultimately helps students and parents."
To some critics of the student loan industry, the fact that lenders liked the bill was proof enough of its flaws, and of the risks that it might undermine bigger changes down the road. "The bill, while a step in the right direction, doesn’t go as far it should," said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. "In that sense, lender support is understandable. Even more important, the lenders would be happy to support any disclosure bill that leaves the excess subsidies hidden in FFEL intact. The main reason for their support of this bill is that they hope its enactment stops the momentum for real reform."