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Political notes

There are a few political goings on that I can’t keep from commenting on.

First, I see John Thune voted for and Tim Johnson voted against an amendment to the defense authorization act that would “strip captured ‘enemy combatants’ at Guantánamo Bay, Cuba, of the principal legal tool given to them last year by the Supreme Court when it allowed them to challenge their detentions in United States courts.” (Registration required…or BugMeNot). Although not directly applicable because we’re not talking about the bill of rights, I can’t help but think of and modify a joke from Discourse.Net:

What’s the difference between an onion and the Bill of Rights?John Thune cries when he cuts into an onion.

To get back to the serious aspect of this action, I recommend Marty Lederman’s overview at SCOTUSblog.

On the other topic, it is refreshing to see that at least some House Republicans have the courage to stand up and say no to the Bush Administration’s insistence on balancing the budget on the backs of those who can least afford it. (Again, registration required…or BugMeNot). I remain stunned that the extensive spending over the last few years — contributed to in large part by the Iraq war and the bipartisan pork-filled transportation bill — is to come at the expense of those who need food stamps, medical care or student loans.

As one who got through all my years of college because of federal student loans, I cannot understand why you would make reductions in a program that actually allows someone to do what the GOP wants — pull themselves up by their bootstraps to a greater economic status. If the GOP truly believes in a balanced budget (which you have to doubt given the last several years), maybe it’s time to realize that the costs of the war, Katrina and the like cannot and should not be paid for only by those who can least afford it. Let’s roll back some of the tax cuts that benefited the richest one percent of the country and let those who of us in society who can afford to pay help out. (And along these lines, I would be remiss not to note Clean Cut Kid’s post on attempting to reconcile the GOP’s stance with the principles supposedly espoused by its Christian right base.)


When I give food to the poor they call me a saint. When I ask why the poor have no food they call me a communist.

Dom Helder Camara (Archbishop of Recife, Brazil)

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2 comments to Political notes

  • Mary

    With respect to the student loan cuts, this legislation won’t save the government any money — it will cost more!! The true beneficiary is Sallie Mae who will pretty much eliminate competition if this bill goes through.

    Read on to see an excellent post from The Turner Report on this subject.

    Mary

    From the Turner Report:

    Lack of competition for student loans and their refinancing is costing 20 million student borrowers and their parents a lot of money. (Competition is literally illegal in many cases.)

    And it is costing the federal government even more because it raises the default rate.

    Here are a few excerpts from news stories about it.

    Congress is considering this over the next two weeks.

    — Fred

    From the (California) Valley News
    October, 2005
    No Competition for Student Loans

    The largest lenders in America have a plan to improve the federally guaranteed student loan program. They want to 1) eliminate competition; 2) raise prices; and 3) hope no one notices.

    From The Street.Com
    By Terry Savage
    November 14, 2005

    If the House bill passes, the vast majority of borrowers, who have already “refinanced” or “consolidated” student loans one time will never be able to do so again.

    Not only is that a rotten deal, but the House is in the process of making it worse. New legislation proposed by the House would prohibit students who are in school from locking in their current rate of 4.75%. Instead, the rate would jump to 6.3% for this year’s graduates, then to 7.9% for those graduating after this coming June.

    A bill now pending in the Senate has similar, but less onerous, changes proposed. While the Senate bill would raise rates for new Stafford loans to 6.8% beginning next July, it doesn’t prohibit in-school consolidation or charge the much higher consolidation rates that the House bill proposes. Instead, it continues to allow borrowers to consolidate at the weighted average of their current loans.

    ……

    Just at the time when our country needs college graduates to keep up with technology changes in this competitive world, we’re punishing students who borrow to finance their education. Why? In two simple words: money and politics. With over $300 billion in student loans outstanding, there’s big money to be made by the relatively few lenders who dominate the market for student loans.
    In fact, for years a quasi-governmental organization called Sallie Mae (Student Loan Marketing Association) dominated the entire market. Awhile back, the organization dropped its federal charter and morphed into a non-governmental, profit-making company that still uses the Sallie Mae nickname but is now officially SLM Corp). It controls so much of the student loan market — nearly 25% of loans outstanding — that in 2004 SLM was among the most profitable companies in the country.

    Profit isn’t a dirty word in this column. But these lenders get a guarantee against default on 98% of the student loan balance, as well as a guaranteed yield of 2.34% over the commercial paper rate on consolidation loans. That and other yield guarantees on in-school loans, have resulted in a net profit of over 1% of loan volume. You do the math. On a portfolio of nearly $100 billion, that’s over $1 billion in profit!
    Now SLM — the old “Sallie Mae” — is strongly behind the current proposals to make it more difficult and expensive for students and graduates to refinance the loans that Sallie Mae and big banks currently hold. If you’re a student, graduate, or parent, it’s time to make your voice heard as the proposals are currently before Congress. Making a college education more expensive is no way to solve our nation’s global competitive problems. And that’s The Savage Truth.

    From the Madison (Wisconsin) Star
    Congress Let’s Sallie Mae Squash Competition

    There’s more: Sallie Mae convinced Congress that too much competition to refinance student loans would be very messy and very inefficient. Once you refinanced your loans once, you were done. No matter if interest rates plunged and you were holding a loan at several points above market rates, there was nothing you could do about it.

    Think of what would happen if America’s largest mortgage lenders tried to pull a stunt like that: They’d either go to jail, or out of business or both. With Sallie Mae, the stock went up.

    These and other legislative edges gave Sallie Mae an enormous advantage in the market place.

    From the Chronicle of Higher Education
    By Stephen Burd

    Meanwhile, loan-industry officials have been pressing Congress to make a significant change to the federal loan-consolidation program, which allows borrowers to combine and refinance their federal student loans. If the industry gets its way, borrowers who seek such consolidation loans would no longer be able to lock in a low, fixed interest rate for up to 30 years, as they are able to now.

    Lenders, like Sallie Mae and Citibank, which have lost a growing share of the market to new companies that specialize in refinancing, have pushed for a shift to variable rates for several years, to make the loan-consolidation program less attractive to borrowers.

    From MSNBC.Com
    By Liz Weston

    “What’s more, powerful lenders are pushing for a big change in the way consolidation loans work. If these lenders succeed — and the odds are with them — interest rates on future consolidations will be variable, rather than fixed, starting in July 2006. (Loans consolidated before then would not be affected.)

    The proposal could add considerably to the cost of getting an education. The nonpartisan Congressional Research Service estimates variable rates on consolidated loans could add $3,000 to $5,500 to the average loan cost over 15 years. The U.S. Public Interest Research Group, a consumer advocate, thinks the potential cost could be closer to $8,000.

    # posted by Fred : 10:04

  • Grace

    I stumbled across this article by Dick Morris about this student loan legislation on another blog. It was published today in The Hill.

    November 16, 2005

    The student-loan rip-off is a test of GOP rhetoric
    Special-interest legislation doesn’t get much more obnoxious than the bill now making its way though Congress to clamp down on students and former students who want to refinance their loans at lower interest rates. They are about to be severely punished for seeking not only an education but a debt-free life afterwards.

    While homeowners can refinance their mortgages as often as they want and relieve themselves of high-interest debt when rates cycle downward, student and former-student debtors are only permitted to refinance once for the lifetime of the loan! And now the House is considering legislation that would stop students who are in school from keeping their current interest rate of 4.75 percent and would instead force them to pay 7.9 percent, creating a lifetime burden entirely unjustified by the lending market.

    Many students are locked into rates that approach 9 or 10 percent, reminders of the grim economic days of the early 1980s, and find themselves with no flexibility. Frequently, students use their once-only refinancing option shortly after graduation and find themselves helpless as the market interest rates drop ever lower.

    Home-mortgage refinancing, often similarly guaranteed by Fannie Mae, has become a huge industry and has given many families alternatives to bankruptcy as they face huge debt burdens. But student loan refinancing — beyond the one shot now permitted — is blocked by special-interest regulation and legislation.

    The legislative efforts by special interests reflect the power of the once quasi-public body Sallie Mae (Student Loan Marketing Association), which has now cut off all connection with the government and instead become a profit-making company unrelated to the government called the SLM Corp.

    With a 25 percent share of the student loan market — more than six times that of its rivals — SLM has cashed in on federal guarantees against defaults on the one hand and blocked student refinancing on the other. As a result, according to columnist Terry Savage, writing for thestreet.com, SLM has made a profit of 1 percent over its loan volume of $100 billion — $1 billion in profit!

    Since student loans constitute one-quarter of all outstanding loans, SLM has huge market power that it has not hesitated to translate into political clout through campaign contributions that water and nourish the Republicans who control the legislative process. In all, the SLM PAC contributed almost $140,000 to the members of the House Education and the Workforce Committee to lock in their preferential treatment.

    Once SLM abandoned its federal charter and went into business for itself, this public-private hybrid should have lost its quasi-governmental status and been forced to compete in the private marketplace like anyone else. All regulations restricting refinancing or consolidation should be repealed. If there was ever an area in which the Republicans should effectuate their rhetoric and deregulate, this is it.

    Student loans are the shackles that most young people take into the rest of their lives after leaving school. Keeping this debt hangover large and rendering it inflexible is about as anti- family a policy as you can get, forcing young people to postpone starting families because of the load of debt with which they begin life burdened. Yet it is the Democrats, led by Sen. Ted Kennedy (Mass.), who are most vociferous in battling for deregulation.

    For President Bush, desperately seeking traction with which to regain his popularity, a crusade on behalf of student debtors, announced in his State of the Union speech, might be just the ticket. He could help himself get out of political red ink by mitigating the financial red ink in which an entire generation finds itself mired.

    Morris is the author of Rewriting History, a rebuttal of Sen. Hillary Rodham Clinton’s (D-N.Y.) memoir, Living History.