Reactions To President Obama's Signing Student Loan Reform Into Law

Here are reactions from across the media spectrum:

• President Obama had this to say at the signing ceremony at Northern Virginia Community College (from New York Times, here is transcript of the comments):

"Mr. Obama portrayed the overhaul of the student loan program as a triumph over an "army of lobbyists," singling out Sallie Mae, the nation’s largest student lender, which he said spent $3 million on lobbying to stop the changes. "For almost two decades, we’ve been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks,"he said. The money, he said, “was spent padding student lenders’ pockets."

• From Secretary of Education Arne Duncan in an interview with Huffington Post:

"This is a $60 billion investment to make higher ed more accessible and more affordable," Secretary of Education Arne Duncan told the Huffington Post in an interview shortly after the signing ceremony. "This is an unprecedented investment."

• The Department of Education's studentloan.gov site has been having problems (not what one would call an auspicious debut), from the IFAP website and a memo dated March 30th (seemed to be working this evening):

"We are currently experiencing issues with the StudentLoans.gov Web site, and the Web site is currently unavailable to users. Users will not receive a message about the site's unavailability if they attempt to access the site at this time—they will receive an error message or be otherwise unable to access the site. We are working to resolve the issues and restore normal Web operations as expeditiously as possible."

• This information won't lead to much sympathy for student lenders...surprising to see this AP headline today "Sallie Mae CEO's compensation put at $5.4 million [here is link to SLM's proxy filing filed today] :"

"The CEO of student loan provider Sallie Mae received compensation valued at nearly $5.4 million last year, a 35 percent cut from 2008, according to an analysis of a regulatory filing Tuesday.

Most of the reduction came from the lower value of stock and options that the lender — formally known as SLM Corp. — gave Albert L. Lord, who began a second stint as CEO in December 2007.

Lord received stock and options that were valued at $3.1 million when they were granted, down from $6.6 million in 2008.

His salary was trimmed to $1.3 million from $1.5 million in 2008, but he got a $950,000 bonus last year after no bonus the year before. His perks fell from $195,118 for a variety of items in 2008 to $43,503 for a contribution to a defined-benefit pension in 2009."

• Los Angeles Times provides several responses from the Republican side of the aisle to the student loan reform bill:

"Rep. John Kline of Minnesota, ranking Republican on the House Education and Labor Committee, said the law amounted to "replacing a popular student loan model with yet another one-size-fits-all government bureaucracy" that would destroy some 30,000 jobs in the private student loan industry [here is Factcheck.org's analysis of that 30,000 jobs claim].

Sen. Charles E. Grassley (R-Iowa) said that students would prefer getting such crucial financing from a banker they know rather than from anonymous bureaucrats.  "I don't see how the students of this country are going to get the same service out of four call centers as they get from their individual banks," Grassley said. 

• The Wall Street Journal chose the bill signing date to publish this editorial "The Ballad of Sallie Mae:"

"President Obama today signs his nationalization of the college student loan market, which will put the Department of Education directly in charge of doling out cash to students and colleges. It's one more plank in the cradle-to-grave entitlement state, but this landmark is also a good moment to recount the rise and fall of Sallie Mae. It's a cautionary tale for our times about public subsidy, arbitrary politics and doing business with the government...We have no special brief for Sallie or its shareholders, who presumably understood the political risks they were running. Democrats have also been shrewd in pitching their takeover as an end to public subsidy, though there will be no such thing. The reality going forward is likely to be even more subsidies, more taxpayer risk and higher tuition prices...As for the cost of college, expect it to become even less affordable as the subsidies keep flowing. The main achievements of this new legislation will be to give more power to government, and to transfer more of the costs and risks of college financing to taxpayers. There's no such thing as a free entitlement state."

• From trade group, America's Student Loan Providers:

"We still believe that a private sector-based federal student loan program that offers better service, consumer choice and critical default prevention programs is in the best interests of students, families, and taxpayers. History will almost certainly record that the claimed savings were greatly overstated, the risks of a government-run student loan monopoly were understated, the public's desire for choice and competition in student loans were ignored, and thousands of student loan experts needlessly lost their jobs."

• As for the changes that students will see, the Christian Science Monitor spoke to a few experts on the topic:  
  • On the student experience:  "Students could see a “smoother origination process,” says Mr. Kantrowitz [Mark Kantrowitz of FinAid], because instead of shopping for a private lender, they’ll simply go to their school’s financial aid office. And because the government has contracted four of the largest lenders to service the loans, that part might go more smoothly, too.  But financially, the bottom line will look the same for students – for now.
  • On the Pell Grant increase:  "But the substantial impact of the new funds will be in preserving recent increases to the Pell Grant from the Recovery Act.  With an increasing number of students qualifying for the grants because of economic hardship in their families, "it would not have been possible to maintain [Pell Grants] at the current level" without this legislation, says Baum [Sandy Baum of the College Board]. “That money had to come from somewhere.”
    • SLA analysis found that Pell Grants had risen 57% for the first two quarters of 2009-10 academic year

• The Chronicle of Higher Education focused on how the Administration's community college initiatives were scaled back in the final bill:

"The president thrust community colleges into the limelight last summer when he called on them to produce five million more graduates by 2020 and proposed a $12-billion plan to improve and expand the institutions. But the student-loan bill provides just a portion of the money Mr. Obama had sought...The measure signed on Tuesday provides $2-billion for job training at community colleges. A version of the bill that passed the House of Representatives in September had contained $10-billion for the institutions and would have financed a broader array of programs, including the colleges' efforts to meet the president's 2020 graduation goal."

• Meanwhile three state non-profits hope to continue servicing federal student loans
  • From Bismarck Tribune:  "We anticipate that the impact to earnings are going to be minimal" in the near term, Hardmeyer [President of Bank of North Dakota] said.  Further on, however, the bank’s earnings from federal loans will disappear as its current portfolio is paid off by borrowers.

    Hardmeyer would like to replace some of the revenue it earns from loans by becoming a processor of student loans.  While the government administers the business as issuer of student loans, it will hire private organizations to handle the work of mailing statements and collecting payments. Hardmeyer believes the bank’s nonprofit status will allow it to enter that business."

  • From Salt Lake Tribune:  "We [Utah Higher Education Assistance Authority] hope to be an effective part of the solution by being a local servicer..."The inference is you go where the best service is and the best service is locally provided," Feitz [UHEAA Executive Director] said. He vowed to fight to win a contract to service Utah loans.

• From Arkansas News:  "The Arkansas Student Loan Authority, which has been funding student loans for more than 30 years, will be reduced to servicing federally funded loans under the bill.  But even that function is uncertain, depending on how much of a fee the government pays for the service, ASLA Executive Director Tony Williams said.

  Also to be considered, Williams said, is the cost of complying with federal contracting requirements for building security, information technology system security and ongoing reports — costs he said will have to be paid out of the loan servicing fee [let's hope they take care of security, more on that later].  “At this point, we do not know if we will be participating or not,” Williams said. “If the pricing is not favorable, we will continue to administer the $600 million in loans we have on our books. As they pay down, it would result in layoffs if we cannot participate in direct loan servicing.”  The agency currently has 18 employees."