Congress is planning to act through a series of laws to reduce the financial burden of loans on college students.
At issue is whether student loans should be consolidated, and if so, how frequently. Currently, borrowers can consolidate their loans at a fixed interest rate once they start repaying their loans, but cannot reconsolidate when rates fall lower.
Rep. John Boehner (R-Ohio), chairman of the House Committee on Education and the Workforce, said, "If we leave the consolidation loan program on autopilot, the cost could balloon, taking billions of dollars away from the very low- and middle-income students we are seeking to help."
Boehner and other Republicans in the House of Representatives, as well as some Democrats like Rep. Robert Andrews of New Jersey, are supported by Sallie Mae, the government-created lender responsible for $50 billion in student loans.
Executive Vice President of Sallie Mae June McCormack, said that allowing people to borrow at a lower rate than the U.S. Treasury would drive up the cost of student loans.
Sallie Mae recommended that instead of changing rules for consolidation, Congress should keep the standard 10-year repayment term or a voluntary tiered repayment system for Stafford loans.
Additionally, Sallie Mae would like to see only borrowers in grace periods or repayment periods eligible for Direct Consolidation Loans and require consolidation counseling.
Rep. George Miller (D-Calif.), the ranking member on the committee, strongly disagrees with the Republican leadership's position. Miller believes that the Republican plan would greatly increase, and perhaps even double, the loan costs for students.
"The Republicans are content to continue to hand big banks huge giveaways at the expense of students and taxpayers," Miller said. Where Congress will go from here is uncertain. Lawmakers are wary of taking away the right to consolidate student loans, but there could be less money to loan students if borrowers are allowed to consolidate their loans repeatedly, or if the amount of money available to be loaned is left up to economic activity.
"Consolidation," McCormack said, "could become the giant that swallowed the student loan program"
