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Reform the Federal Student Loan Program

(These are the prepared remarks of Education and Committee Chairman George Miller from today’s press conference on the urgent need to include student loan reform as part of the reconciliation.)

Senate Democrats have a very simple choice to make in the next few weeks.

This choice speaks to the true character of our country and of our Congress.

It speaks to what America’s priorities will be for the next generation.

It speaks to fiscal responsibility and fairness.

Here’s the choice. We can continue a student loan program that the Congressional Budget office has documented will waste tens of billions of dollars over the next 10 years on a titanic boondoggle in excess subsidies to some of the nation’s rich and most powerful banks.

Or we can do what President Obama suggested in his budget, and what the Congress voted last year to do in its budget resolution.  We can reform the student loan program by taking these wasteful subsides to banks, and redeem the savings for millions of families and students who want a shot at attending college, go to a community college, and attend a school that is crumbling around them.  

It is that simple.

Just consider what this bill would do for students, families – and our economic future.

It would invest tens of billions of dollars in the Pell Grant scholarship.

For millions of Americans, Pell Grants are the pathway to prosperity.

They have become America’s great equalizer – allowing anyone with talent and gumption to get an education and a good job.

There are few greater job creators than a highly skilled workforce.

Our bill would invest billions in school modernization, give urgent help to historically black colleges and Hispanic serving institutions, and boost support for the nation’s bedrock local community colleges.

It would make our community colleges part of the solution to our competitive challenges by giving them the tools they need to prepare students for good jobs with local employers.

Who in good conscience can trade any of this away for billions in excess subsidies for banks?

Now, this is not a radical idea.

In his 2005, 2006 and 2008 budget requests, President George W. Bush recommended reducing these wasteful subsidies by tens of billions of dollars.

President Obama has shown the courage to take this on by insisting we re-deploy all of these subsidies to help students and families.

The 2009 budget resolutions passed by the House and Senate required both chambers to use reconciliation to enact student loan reforms that save taxpayers billions of dollars.

In order to comply with these reconciliation instructions, we would be required to save $1 billion for taxpayers over 5 years.

This legislation would be fully paid for.

But now this promise is at risk.

Critics of this bill, fueled by the banks’ well-heeled lobbyists, have been hard at work fighting to kill it.

They have been busy spreading lots of falsehoods about how this bill might impact the budget, or jobs, or students.

Let me set the record straight, right now.

This bill will not add a penny to the deficit – it will help reduce it. The budget reconciliation instructions require that any student loan reforms return at least $1 billion to the Treasury over 5 years.

It will meet PAY-GO. We are committed to that, and it will be done.

The bill creates and retains jobs.  It maintains a robust and appropriate role for private banks and lenders in servicing loans. Servicing loans through the Direct Loan program will not only preserve most jobs, it will bring jobs back home that can currently be shipped overseas by lenders.

Moving to Direct Loans is a much better use of taxpayer dollars. Consider that right now, between schools that have switched to Direct Loans and emergency federal aid banks are relying on – the federal government is already funding 8.8 of every 10 dollars lent in federal student lending.

The current FFEL system can’t continue.  We saw this two years ago when the markets seized up, students would have been left high and dry if we had not stepped in to provide liquidity.  

It’s also wrong to suggest this is being talked about at the 11th hour.

We have known since last April that reconciliation would be used for this bill.

So this is really what is comes down to now.

The Senate has a choice to do something that is fair and right for American families.

They have a choice to end this system of corporate welfare for banks – a system that has stayed alive because of well-entrenched lobbyists and cozy Washington relationships.

They can either continue to send tens of billions of dollars to banks and a broken system – or they can send those dollars directly to students, at no costs to taxpayers.

This is a moment in history where Senators can either look back and say – we did the right thing for the American people, or they can say we did the bidding of banks.