Transcripts of Yesterday's House Committee Meeting
The full transcript for the House Committee Meeting on HR 4283 is now available on the committee's website. Sarah Wasserman of the United States Student Association gave what appears to be the only beneficial remarks about student loan consolidation, but even those did not address the needs of former students and the one-time consolidation rule:
Consolidation is an important tool that helps low and middle-income students manage their debt and makes college affordable.† Congress should not deny student borrowers this benefit now when they need the help the most.While we share the concern that the costs of the consolidation loan program have the potential to increase significantly over the next decade, we are shocked that the leadership of this committee has decided to bend to the will of the big lenders and deny low and middle-income students the choice to lock in a low-fixed interest rate.
The fact of the matter is that the big lenders†that participate in the student loan program do not like the consolidation program because they are forced to pay fees to participate and because it increases competition in the market-as most students (but not all) can shop around to find the best deal and service for their loans.† Due to low interest rates in the past few years, more and more students have consolidated their loans, increasing the likelihood that these students will switch lenders.† The lenders that hold the lion's share of the total outstanding student loan debt would like to eliminate the current low-fixed rate benefit in order to do away with the competitive market so that they can protect their portfolios and profit margins.†
The elimination of the current low-fixed rate benefit in H.R. 4283 comes as lenders in the student loan program continue to earn huge profits.†† According to a recent issue of Fortune magazine, Sallie Mae is the second most profitable company in the United States with a 37 percent return on their revenues in 2003.† To give people context, the median return for the 500 biggest companies in the United States was 5 percent in 2003.† In addition, according to a U.S. News and World Reports article, in 2002, Sallie Mae's chief executive, Albert Lord, pocketed nearly $34 million in salary, bonus, and stock option payments.