Alexander statement on student loans half-true
The statement: “We are overcharging students . . . to help pay for the health care law.” — Sen. Lamar Alexander
The health care law that passed in 2010 and which most Republicans say they’d like to scrap has hundreds of provisions, including new sources of revenue to pay for expanded coverage.
Recently, some politicians have made the case that the new law is being paid for in part by using the savings created when Congress took private banks and the subsidies they received out of the business of making guaranteed loans to students.
Alexander, the Secretary of Education under the first President Bush, took to the Senate floor in May to claim, “We are overcharging students . . . by $8.7 billion to pay for the health care law.”
We decided to look at whether that’s correct. Alexander’s office declined our request for further clarification of his position.
Our colleagues at PolitiFact Ohio tested a similar claim by Sen. Rob Portman, R-Ohio, and concluded his statement was Half True. Poli- tiFact New Hampshire also examined a statement from Republican Sen. Kelly Ayotte, and ruled it Mostly False. The major elements of those items apply here, as well.
The Reconciliation Act of 2010, which changed both student loans and health care, passed the Senate in March of 2010.
Making direct student loans and cutting out the subsidized middle man — private banks — was estimated by the Congressional Budget Office to save $58 billion over 10 years.
Of that savings, $36 billion was set aside for additional student Pell grants, and an additional $3 billion went to other education programs, including historically black colleges and universities. That left roughly $19 billion in savings. Some $10 billion of that was set aside for debt
reduction.
That leaves roughly $9 billion and it’s where Alexander’s $8.7 billion figure comes from.
Alexander’s floor speech was intended to persuade his colleagues to use some of that $8.7 billion, currently set aside for elements of the public health fund created by the health reform act, to pay for keeping the student loan interest rate, scheduled to rise later this year, at 3.4 percent.
Also in his speech, he was critical of the move to get rid of the subsidies to the banks through direct student loans. He said those who proposed the direct loans “did that on the theory that the banks were making too much money.”
Again, the savings over 10 years is expected to be $58 billion — money that would have gone not to students, but to the banks.
As our colleagues in Ohio wrote: The combined student loan-health care bill did not reduce the amount of money that students can borrow. It actually expanded the amount of money available for student aid. What it reduced is the banks’ share.
Alexander also made the case that the government is borrowing money at 2.8 percent and lending it to students at 6.8 percent in order to fund the health care program. That’s the explanation for his saying the government is “overcharging students.” Alexander did not say whether there was “overcharging” when private banks were making student loans with the help of federal government subsidies.
Our colleagues in New Hampshire explained that just pointing out the spread on those two interest rates does not put the entire program’s costs into proper context. Now that they are not receiving subsidies, banks have largely gotten out of the student loan business because it is not profitable for them — even though they can get the same terms as the federal government.
“Banks can borrow at the same rate as the federal government,” said Jason Delisle, director of the Federal Education Budget Project at the New America Foundation. “They don’t make money off
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She cited her sponsorship of a bill extending foster- care benefits from age 18 to 21, which finally won approval under a Republican sponsor.
Marrero has the backing of her mentor, U.S. Rep. Steve Cohen. Kyle won the endorsement last week of the Memphis Education Association.
The winner Aug. 2 faces Republican Colonel Billingsley in November (he is unopposed in his primary) but the district is heavily Democratic. — Richard Locker:
(615) 255-4923 lending to students at 6.8 percent. … This concept that the difference between the rate the government charges on the loan and the rate they pay to borrow is profit, is totally wrong.”
Our ruling
Do the savings from ending the private banking subsidies for student loans help pay for the health care law? Yes, but only 15 percent of those savings is going to health care, and even with that , the bill actually expanded the amount of revenue available for assisting students financially. We rule Alexander’s statement Half True .
Contact Washington correspondent Bartholomew S ullivan at (202) 408-2726.