Friday, December 23, 2005


Congress just passed the single most anti-competitive, anti-consumer law in America in the wee hours of the morning on Monday. They outlawed the refinancing of student loans. Yet news of it was missing from the AP reports. Below are two explanations of what they did (written before they did it):

"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. If not for Hurricane Katrina grinding all business in Washington to a stop, they might have gotten their way - and raised the prices of attending college by $10 billion a year, costing the average student more than $6,000 for more expensive student loans.

But student loan legislation is back on track, with legislators expected to create a new education bill in the next two weeks. In the meantime, lots of people are wondering why student loan borrowers can't have more choice, lower interest rates, better terms, and more competition among lenders. Especially when it also means reducing the federal budget deficit.

This heightened awareness of student loan programs comes every five years or so when Congress reauthorizes the Higher Education Act. Since the last legislation, the student loan market has been hit with what Citizens Against Government Waste calls a "perfect storm" of more students going to college, tuition doubling and the annual volume of student loans tripling to $50 billion - all in less than ten years.

Last year, the Student Loan Marketing Association, the former federal agency that controls the vast majority of the industry with more than $100 billion in student loans, went private and has quietly become one of the most profitable companies in America.

So a lot has changed since the last time Congress looked at student loans.

And a lot more change is on the table. Chief among these changes is what to do with student loans in an era of changing interest rates. Many students and parents want the option to refinance their loans at a lower, fixed rate over a longer period of time with the lender of their choice. Just like any other loan.

Today, some can - and do. But current law says most cannot: If students get their loans from a single lender, they cannot change that lender - even if another lender offers them better rates, terms or service. It's called the Single Holder Rule, and it helps ensure Sallie Mae and the other big lenders keep their customers safe from competition.

It works.

The same law also says most borrowers can only consolidate their loans once. It worked, too, until some students and parents recently discovered a loophole they could use to move their loans to a lender offering better rates.

But the big lenders are determined to use their legislative muscle to protect that business.

Student loan experts agree that this kind of anti-competitive practice would not be allowed in most business situations. But this is not a business school seminar. This is a real world situation with one of the most profitable financial businesses in America.

"Big lenders that participate in the student loan program do not like the federal consolidation program because the lender is forced to pay fees and taxes 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," said Sarah Wasserman of the United States Student Association in front of a congressional committee. "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."

"Most big financial institutions don't like consolidation loans because they're less profitable," said Barry Morrow, CEO of Collegiate Funding Services, in congressional testimony. "Opponents of the consolidation loan program claim that the program benefits primarily doctors, lawyers and other high-income professionals. However, data we are providing to the Committee shows quite the opposite. Less than 4% of consolidators are doctors and lawyers - and nearly 20% are nurses and teachers. Their average age is only 27. This is not a program that favors the affluent."

Wasserman, Morrow and many others say students and their parents should be allowed to refinance their students loans whenever they want, with whomever they want, at whatever rates and terms the market will bear. Just like a home loan. But first, parents and students will have to change some hearts and minds in Congress.

New legislation passed by the House of Representatives would give the students the choice between fixed and variable rate consolidation loans, but with a twist: the loans would carry more fees and a higher interest rate, removing the major incentive to consolidate in the first place.

Another provision would eliminate a student's right to consolidate their loan before leaving school in order to lock-in lower rates.

"The new legislation is clearly toward big lending institutions and their hefty profits, not students and their thin wallets," said Congressman George Miller of California.

The Senate version is not as onerous. But it would fix the rate on all new loans at 6.8% for students and 8.5% for parents. Hardly a bargain in today's market, and if market rates should go down over the coming years, students and parents would be paying a hefty premium to scrape together the money needed for school.

In a company newsletter, Sallie Mae executives said they support the move from a fixed to a variable interest rate consolidation program even though it will actually diminish their profits".


Ohio Congressman Boehner's "Tricks" Are Not For Kids

When Ohio Congressman John Boehner recently told a gathering of student loan bankers that he had some "tricks up my sleeve to protect you," he wasn't talking about new tricks. He was talking about the oldest trick in the book: "Protecting" business people from competition and innovation. Stopping consumers from getting lower rates and better terms for their student loans. These tricks are not for kids.

The student loan business is now one of the most profitable in America, says Fortune Magazine. And it did not get that way because student loan bankers are smarter, better or less expensive than bankers in other industries. It is more profitable because they have more protection from competition. And now Boehner, head of the House Committee that oversees student loan legislation, is promising them even more protection from the one force that drives down prices, improves service, and stimulates innovation: Competition, of course. Which in the student loan business in almost non-existent. Thank you, Congressman Boehner.

That is the way it was until earlier this year, when in January, the Department of Education ruled that borrowers looking to reconsolidate their student loans could sidestep the longstanding anti-competitive rule against doing so. It was cumbersome, but effective. Borrowers had to use a two-step process of reconsolidating into the federal governement's Direct Loan Program, then reconsolidating again with a private lender offering better rates. Before then, borrowers were locked in to their current lender no matter what other lenders offered them a better deal.

In May, the Department of Education set aside another longstanding anti-consumer policy by ruling that borrowers who are still in school could convert their variable rate student loans into fixed-rate consolidaton loans before rates increased in July. That way they could take advantage of historically low interest rates, much as millions of other borrowers do with their home loans.

While borrowers celebrated, consumer bankers plotted. Enter Boehner. Buried deep in legislation to raise prices on student loans are provisions that will largely outlaw the reforms that introduced so much competition into student loans earlier this year. If passed, student loans would once again be the only thing sold in America that cannot be freely refinanced.

Columnist Dick Morris calls the anti-refinancing scheme an "obnoxious .. ripoff." Terry Savage, the financial columnist of, says there is "no way" borrowers should support this plan." The New York Times calls it "Robbing Joe College to Pay Sallie Mae," the country's largest student loan provider. The Times Union of New York, calls plans to outlaw refinancing a "student loan shame.' Boehner's tricks are not for kids.


Australia: Boys' education funds unveiled

Feminize education and then throw money at the problems that creates: Brilliant!

More than 800 schools across Australia will receive Federal Government funding to target the education of boys in an effort to bridge the gap with girls. Education Minister Brendan Nelson said 801 schools would receive grants in round one of the Government's $19.4 million Success for Boys program. Dr Nelson said the first round of funding would result in 235 individual schools and 113 school clusters receiving grants of between $10,000 and $80,000 to help them improve the way they work with boys.

The program aimed to support boys at risk of disengaging from school, and improve their learning outcomes and engagement in school, he said. Three key intervention areas of benefit to boys will be addressed by schools - giving boys opportunities to benefit from positive male role models and mentors, improving literacy teaching and assessment and using information and communication technology to engage boys in learning. "It is imperative that nothing is done which undermines the important and necessary progress made in the last 20 years in the education of girls," Dr Nelson said. "However, the evidence is overwhelming that boys are falling behind in our education system. Many boys enjoy school and are successful in their studies. However, it is of concern that many others are under-performing in a range of key educational areas and broader social indicators. We know that boys are underperforming in literacy, are less engaged with school, and overwhelmingly outnumber girls in disciplinary issues."

Since 2003, the Federal Government has committed more than $27 million to improve boys' educational and social outcomes, he said.



For greatest efficiency, lowest cost and maximum choice, ALL schools should be privately owned and run -- with government-paid vouchers for the poor and minimal regulation.

The NEA and similar unions worldwide believe that children should be thoroughly indoctrinated with Green/Left, feminist/homosexual ideology but the "3 R's" are something that kids should just be allowed to "discover"

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