Speech in Opposition to HR 3221
House Chamber, Washington, D.C. September 16, 2009. M. Speaker: This measure is very much a case study in how a public option becomes a public monopoly in the span of just a few years.
In 1993, the government created the Direct Loan Program under the pretext that it was just another option to increase consumer choice. There was only one problem: consumers never warmed to it. At its peak, the government Direct Loan Program only attracted 34 percent of loan volume. Today, even with the financial difficulties in the private sector, it has only earned 27 percent of the market.
The rest is ably administered by 1,500 active lenders, servicers and guarantee agencies that employ more than 30,000 private sector workers.
This bill literally shuts down 40 years of successful private sector involvement with student loans and hands the government monopoly control.
As the bumper sticker warns: the government hates competition.
We’re told this is to save money. Pardon my skepticism, but I seriously doubt the same government that runs FEMA will bring efficiency to the student loan program.
It is precisely the fierce competition among loan providers that has produced lower prices for students and universities and that produces innovations in loan delivery, processing and servicing – not to mention broader benefits, such as college planning services, financial literacy education, default aversion and FAFSA assistance.
One of those providers is the California EdFund, near my district.
Last year alone the Ed Fund helped nearly 420,000 borrowers to avoid default, saving taxpayers $4.2 billion in default claims. That’s ONE provider: $4.2 billion in savings for American taxpayers.
Before the government took over our auto manufacturers, Will and Ariel Durant asked, “What makes Ford a good car? Chevrolet.”
Competition. That creative and innovative force is snuffed out in the student loan industry by this bill. And mark my words, if this bill becomes law, we will be back here within a few years to address growing cost overruns and inefficiencies in yet another government monopoly program.