WASHINGTON, June 13 /PRNewswire-USNewswire/ -- Just over a year after Congress passed the largest cut in student loans in history, the House Education and Labor Committee is expected to approve a new set of regressive taxes and cuts on student loans that will leave borrowers with fewer choices and higher interest rates on their student loans.
The new budget cuts would impose regressive, across-the-board cuts of between 23% and 35% on the amount that lenders may earn on loans -- regardless of the lender's size. It would also double the fees that lenders already pay, which totaled nearly $562 million last year.
"These new taxes and across-the-board cuts will destroy competition from the smaller lenders that have been driving costs down for borrowers," said Chairman and CEO Dr. Henry B. Howard. "If this proposal becomes law, current interest reductions will be history and the only lenders left standing will be a small cartel of Sallie Mae and mega-lenders and the federal government's Direct Loan monopoly -- a 'lose-lose' for consumers and taxpayers."
The federal student loan program is currently dominated by a handful of large, mega-lenders. According to the U.S. Department of Education, Sallie Mae holds 35% of the $325 billion in outstanding federal student loans, and the top 10 lenders hold over 70% of those loans.
"As a lifelong Democrat, I am disappointed that the Committee decided to follow President Bush's destructive roadmap of across-the-board cuts in student loans." Howard said, "Americans want more choice and competition, and we can ensure this by focusing the larger cuts on the lenders that currently dominate the program."
A more fair and equitable alternative for Congress to pursue is progressive lender cuts based on the amount of loans a lender holds. Under such a plan, small lenders and secondary markets would be able to stay competitive and the government would generate nearly $9 billion in savings over 5 years.
U.S. Education Finance Group, headquarters in Miami, FL, is an industry leader in the Federal Family Education Loan (FFEL) Program and has helped hundreds of thousands of students and their families finance the cost of higher education. With one of the most diverse workforces and management teams in the student loan industry, USEFG's commitment to diversity and equal opportunity has helped make it a leader in providing education financing for a wide range of borrowers.
U.S. Education Finance Group
CONTACT: Sharon White, +1-202-715-1507, for U.S. Education Finance Group
