July 23, 2003
Regula wants to ease student loan rules
By PAUL M. KRAWZAK
Copley Washington correspondent
WASHINGTON — Young people paying off federally subsidized student loans should have broader options for consolidating their loans to lower the interest rate, Rep. Ralph Regula told lawmakers Tuesday.
“With interest rates at historic lows, it is unfair to limit the choices that these recent graduates are given,” he said while testifying before an Education and Workforce Subcommittee.
Legislation proposed by Regula, R-Bethlehem Township, and others in Congress would allow students to take advantage of historically low interest rates as they consolidate multiple loans into a single plan.
Opponents of the effort, including retail bankers, warned that expanding the options for borrowers would increase costs to the federal government and lenders. The federal government subsidizes student loans to make them more affordable.
Some lawmakers are pushing to allow borrowers to refinance their student loans many times, rather than just once, as allowed by current law.
Under another provision of the law, known as the single-lender rule, a borrower whose loans are all from one lender may consolidate only with that lender. A recipient of loans from more than one lender is allowed to shop around.
A bill introduced by Regula would allow borrowers who have loans from a single lender to consolidate with a different lender.
“This exception makes no sense and is unfair to this one group of student loan recipients” whose loans are all from one lender, Regula said. “I believe that the graduates of schools of higher education are capable of deciding what is best for them, whether they received loans from one lending institution or multiple institutions.”
Rep. Rosa L. DeLauro, D-Conn., who also testified before the subcommittee, sponsored legislation that would go beyond Regula’s bill by permitting borrowers to refinance as often as they wish.
DeLauro’s bill also would waive loan and origination fees charged to borrowers when student loans are consolidated. It also would increase the federal Pell grant to a maximum of $7,000.
Regula supports ending the one-time limit on refinancing student loans “because I can refinance my house as many times as I want to,” he said.
Rep. John Boehner, chairman of the Education and Workforce Committee, urged caution in changing student-loan rules. He said the result could be a shift of federal aid to those paying off loans at the expense of students who need financial aid.
“These people aren’t students,” said Boehner, R-West Chester. “They’re out of school. They’re making money. We ought to talk about what’s fair.”
He said the cost of the loan program has grown to $50 billion a year from $10 billion a year in 1990, and is projected to reach $100 billion a year by the end of the decade.
When students refinance to lower rates, intricacies in the way that loan interest is calculated could result in the government’s picking up a larger share of the cost of loans to make up for the smaller cost borne by students, an aide to Boehner said.
In a statement to the committee, the Consumer Bankers Association said if interest rates were to rise to 6 percent, it would cost the government an additional $17 billion to pay for loans that were consolidated last year.