Released: November 27, 2006

Student loan bankers on edge

Source: Janet Hook, Los Angeles Times (Free Registration)

The college student loan industry has been so well-connected in the Republican-controlled Congress that a powerful committee chairman once assured its bankers and other financiers that their interests were in “two trusted hands.”

Now that Democrats are about to take control of Congress, those bankers will have to contend with a lawmaker who has compared them to the usurers Jesus drove from the temple of Jerusalem.

“It’s time to throw the money-changers out of the temple of higher education,” thundered Sen. Edward M. Kennedy (D-Mass.), who is in line to become chairman of the Senate committee that oversees education programs.

Within the student loan industry, the impending transfer of party control is producing anxiety — in part because Democrats have promised that one of their first acts will be to cut interest rates on federally backed student loans from 6.8% to 3.4%.

Having worked hard over the last decade to make Republican friends in high places, nervous bankers are now moving quickly to open wider avenues of communication with ascendant Democrats, such as Rep. George Miller (D-Martinez), incoming chairman of the House Education and Workforce Committee, who got a last-minute postelection invitation to address a student-loan trade meeting this week.

Cutting student loan interest rates was part of a six-item agenda that Democrats ran on in the midterm election. The cost to the Treasury would be an estimated $18 billion or more over five years.

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