Palm Beach Post Editorial
September 12, 2007

How badly have private lenders been fleecing college students? It took 60 years for Congress to fully reform what became an $85 billion college loan industry.

The bill that would reduce public subsidies to the loan companies by $20.9 billion over five years is a milestone. The legislation Congress approved Friday actually would help students more than the private companies that administer the federally backed loans. Billions that have been going to lenders can assist students with financial aid and reduced interest payments on their higher education loans.

In typical fashion, the lenders argue that the bill would result in fewer companies that have been gouging students with "preferred lender" schemes seeking out business. The absurd suggestion is that without more private middlemen benefiting from the risk-free, guaranteed-profit lending of public money, students will suffer.

Yet even on the eve of the congressional action, The New York Times was documenting more relationships between colleges and student loan companies. Those spurred New York Attorney General Andrew Cuomo's investigation of the student loan industry, a probe that found ties between lenders and colleges that took kickbacks and winked at predatory lending schemes.

The legislation provides debt forgiveness for students who work 10 years in public-sector jobs such as nursing, public safety and early childhood education. Undergraduates who commit to teaching in high-need public schools would receive upfront tuition assistance of $4,000 a year, to as much as $16,000, starting from the 2008-09 academic year. The bill halves interest rates for students starting July 1, from a current 6.8 percent to 3.4 percent, phased in over four years. There's also a $510 million investment in the colleges that increasing numbers of minorities will attend.

Still, students such as Gabriel Pendas, who graduated last year from Florida State University with a degree in physics and $45,000 in debt, expects to "be paying my whole life." The president of the 1.3 million-student United States Student Association calls the bill is a "good first effort." Congress still must address the underlying problem in many areas of rising tuition.

Despite his early threats to the contrary, and his fellow Republicans' grumbling over Democrats having fulfilled a campaign promise, President Bush has said he will sign the bill. The Clinton administration tried to make college lending more like the postwar GI Bill. This new bill gets the country closer.