CCAGW Criticizes Thomas Petri's Effort to Save Student Loan Program



CCAGW Criticizes Thomas Petri's Effort to Save Student Loan Program

CCAGW Criticizes Effort to Save Student Loan Program

WASHINGTON, March 15 /PRNewswire/ -- The Council for Citizens Against Government Waste (CCAGW) today criticized Senators Ted Kennedy (D-Mass.) and Gordon Smith (R-Ore.) and Representatives Thomas Petri (R-Wis.) and George Miller (D-Calif.) for reintroducing the Student Aid Reward Act, which will use taxpayer dollars to stimulate the growth of the money-leaking Federal Direct Loan Program (FDLP). A March 2004 report from the Government Accountability Office (GAO) raised questions on whether FDLP was saving money. The report found that in fiscal years 1995-2003, total cash outflows for FDLP exceeded total cash inflows by $10.7 billion.


WASHINGTON, March 15 /PRNewswire/ -- The Council for Citizens Against Government Waste (CCAGW) today criticized Senators Ted Kennedy (D-Mass.) and Gordon Smith (R-Ore.) and Representatives Thomas Petri (R-Wis.) and George Miller (D-Calif.) for reintroducing the Student Aid Reward Act, which will use taxpayer dollars to stimulate the growth of the money-leaking Federal Direct Loan Program (FDLP). A March 2004 report from the Government Accountability Office (GAO) raised questions on whether FDLP was saving money. The report found that in fiscal years 1995-2003, total cash outflows for FDLP exceeded total cash inflows by $10.7 billion.

"With a straight face, these members of Congress tell us that we should use tax dollars to bribe colleges and universities away from more efficient private source loans to the failing direct loan program, all in the name of ’saving money,’" CCAGW President Tom Schatz said.

According to a GAO report released in November 2003, the FDLP share of total new loan volume steadily decreased from its peak of 34 percent to 28 percent. Many colleges and students flocked to the privately-run Federal Family Education Loan Program (FFELP) for its more attractive terms to borrowers.

The direct loan program, first implemented in 1993 with the promise to save tax dollars by cutting out the "middle man" of commercial banks, is similar to the private FFELP, but differs in a fundamental way. FFELP uses private sources such as banks or other lenders to provide federally guaranteed student loans. Private lenders issue, service, and are paid back the loans. In contrast, FDLP loans are taken directly from the U.S. Treasury, and recipients pay the money back to the federal government. FDLP is losing money because origination fees and receipts from borrowers are less than the amount of interest the Department of Education (DoED) pays on the money it borrows from the Treasury.

In 1999, the DoED inspector general estimated it cost the government $17 per loan to manage the FDLP while it would have cost private lenders $13 per loan to manage the same program. In fiscal 2005, the DoED will provide nearly $84 billion in student aid grants and loans to 10 million students and parents. Considering the large percentage of loans still outstanding, the FDLP is digging itself into a deeper financial hole. Senator Kennedy claims that the savings in his legislation will be used to increase Pell Grants, costing taxpayers nothing.

"We have heard this siren song before," Schatz concluded. "Whenever Senator Kennedy talks about a government program that will save tax dollars, taxpayers should hang onto their wallets. Congress needs to wake up to the real costs of direct lending instead of expanding a program that continues to waste tax dollars it was purportedly designed to save."

CAGW will issue a report this spring on why the direct loan program has not delivered on its promised savings.

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

CONTACT: Tom Finnigan or Lauren Cook of the Council for Citizens Against
Government Waste, +1-202-467-5300

Web site: http://www.cagw.org/

When this story was posted in March 2005, this was on the front page of PCOL:

The Peace Corps Library Peace Corps Online is proud to announce that the Peace Corps Library is now available online. With over 30,000 index entries in over 500 categories, this is the largest collection of Peace Corps related reference material in the world. From Acting to Zucchini, you can use the Main Index to find hundreds of stories about RPCVs who have your same interests, who served in your Country of Service, or who serve in your state.

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RPCVs in Congress ask colleagues to support PC RPCVs Sam Farr, Chris Shays, Thomas Petri, James Walsh, and Mike Honda have asked their colleagues in Congress to add their names to a letter they have written to the House Foreign Operations Subcommittee, asking for full funding of $345 M for the Peace Corps in 2006. As a follow-on to Peace Corps week, please read the letter and call your Representative in Congress and ask him or her to add their name to the letter.

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Add your info now to the RPCV Directory Call Harris Publishing at 800-414-4608 right away to add your name or make changes to your listing in the newest edition of the NPCA's Directory of Peace Corps Volunteers and Former Staff. Then read our story on how you can get access to the book after it is published. The deadline for inclusion is May 16 so call now.

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March 12, 2005: This Week's Top Stories The Coyne Column: Read Winning Essay by PCV 12 Mar Laura Germino helps Migrant Workers Advocacy Group 12 Mar Sam Farr impresses medical-pot advocacy group 11 Mar Fred O'Regan writes Op-Ed on Canada seal hunt 11 Mar Fern Holland remembered In Oklahoma 10 Mar Mountaineer Charles Houston receives honorary degree 10 Mar Elaine Chao led delegation for President's inauguration 10 Mar Chris Dodd wins Hispanic Capital Award 9 Mar Pat Waak is new Colorado Democratic Party Chair 9 Mar Chris Matthews withdraws from Florida Event 9 Mar Timothy J. O'Brien returns to Korea 8 Mar Tomas Belsky's paintings inspired by service in Brazil 7 Mar Christopher Hill to be Assistant Secretary of State 7 Mar Allen Moore is Sen Frist's Deputy Chief of Staff 7 Mar Jim Doyle heads trade delegation to Mexico 5 Mar Al Kamen says Narcissus Is Now Greek AND Roman 4 Mar Diana Gomez says to do something about Peace 4 Mar

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March 12, 2005: RPCV Groups in the News San Diego RPCVs host reception with Gaddi Vasquez on March 6 4 Mar Alaska RPCVs speak for dividend 4 Mar Western North Carolina's RPCVs sponsor Africa Night on March 6 3 Mar Maryland RPCVs lobby their Senators for Peace Corps 3 Mar Connecticut RPCVs hold fundraiser on March 5 3 Mar Charles Baquet speaks at Louisiana PC Breakfast on March 4 28 Feb RPCVs: Post your stories or press releases here for inclusion next week.

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March 1: National Day of Action Tuesday, March 1, is the NPCA's National Day of Action. Please call your Senators and ask them to support the President's proposed $27 Million budget increase for the Peace Corps for FY2006 and ask them to oppose the elimination of Perkins loans that benefit Peace Corps volunteers from low-income backgrounds. Follow this link for step-by-step information on how to make your calls. Then take our poll and leave feedback on how the calls went.

Make a call for the Peace Corps PCOL is a strong supporter of the NPCA's National Day of Action and encourages every RPCV to spend ten minutes on Tuesday, March 1 making a call to your Representatives and ask them to support President Bush's budget proposal of $345 Million to expand the Peace Corps. Take our Poll: Click here to take our poll. We'll send out a reminder and have more details early next week.

Peace Corps Calendar: Tempest in a Teapot? Bulgarian writer Ognyan Georgiev has written a story which has made the front page of the newspaper "Telegraf" criticizing the photo selection for his country in the 2005 "Peace Corps Calendar" published by RPCVs of Madison, Wisconsin. RPCV Betsy Sergeant Snow, who submitted the photograph for the calendar, has published her reply. Read the stories and leave your comments.

WWII participants became RPCVs Read about two RPCVs who participated in World War II in very different ways long before there was a Peace Corps. Retired Rear Adm. Francis J. Thomas (RPCV Fiji), a decorated hero of the Japanese attack on Pearl Harbor, died Friday, Jan. 21, 2005 at 100. Mary Smeltzer (RPCV Botswana), 89, followed her Japanese students into WWII internment camps. We honor both RPCVs for their service.

Bush's FY06 Budget for the Peace Corps The White House is proposing $345 Million for the Peace Corps for FY06 - a $27.7 Million (8.7%) increase that would allow at least two new posts and maintain the existing number of volunteers at approximately 7,700. Bush's 2002 proposal to double the Peace Corps to 14,000 volunteers appears to have been forgotten. The proposed budget still needs to be approved by Congress.

Read the stories and leave your comments.