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Student Aid And Fiscal Responsibility Act Of 2009

Floor Speech

Date: Sept. 16, 2009
Location: Washington, DC
Issues: Finance and Banking Higher Education

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Mr. McCLINTOCK. I thank the gentleman from Minnesota.

Madam Chairman, this really is a case study in how a public option ultimately becomes a public monopoly in a span of just a few years.

The gentleman from Minnesota is absolutely right, this Direct Loan Program was established in 1993 as a public option. It was designed to increase consumer choice; that's what we were told at the time. It had only one problem. The consumers never warmed to it.

At its peak, the government Direct Loan Program only attracted 34 percent of loan volume. Today, even with all of the financial difficulties in the private sector, it has earned only 27 percent of the market. The rest of that market is ably administered by 1,500 active lenders and servicers and guarantee agencies that employ more than 30,000 private sector workers. This bill literally shuts down 40 years of successful private sector involvement with student loans and hands the government monopoly control. As the bumper sticker warns, the government hates competition.

We're told this is going to save money. Well, pardon my skepticism, but I seriously doubt that the same government that runs FEMA is going to bring efficiency to the student loan program. In fact, it's precisely the fierce competition among loan providers that has produced lower prices for students and universities and that produces innovations in loan delivery and processing and servicing, not to mention broader benefits such as college planning services, financial literacy education, default aversion, and FAFSA assistance.

One of those providers is the California EdFund, near my district. Last year alone, the EdFund helped nearly 420,000 borrowers to avoid default. They saved taxpayers $4.2 billion in default claims; that's one provider, $4.2 billion in savings for American taxpayers.

Before the government took over our automobile manufacturers, Will and Ariel Durant asked this question: What makes Ford a good car? Chevrolet. Competition. That creative and innovative force is snuffed out by this bill for the student loan industry. And mark my words, if this bill becomes law, we are going to be back here in a few years to address growing cost overruns and inefficiencies in yet another failed government monopoly program.

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