For Profit Colleges

Legislation that the U.S. House of Representatives approved last week would make landmark changes to the federal student loan programs -- changes that we have advocated at Higher Ed Watch for the last three years.

We can not overstate the significance of this achievement. Despite fierce opposition from the deep-pocketed student loan industry and their allies on Capitol Hill, the House moved forward with a bill that would eliminate unnecessary middlemen from the process of originating and guaranteeing federal student loans, and would have the government make all federal student loans directly. If this change is enacted into law, it will overwhelmingly simplify the federal student loan program and redirect a massive amount of federal funds out of the pockets of lenders and into the hands of the students who need the help the most.

Having said that, the House bill is far from perfect. The measure contains one provision that we believe is extremely misguided and will, if enacted, harm the cause of student loan reform, and another that would gut a key consumer protection provision in federal law that aims to safeguard students from unscrupulous trade schools. It also has other provisions that are well-intentioned but, as written, are unlikely to achieve the lofty goals the bill's authors have set for them.

Attention will soon shift to the Senate, where the leaders of the Health, Education, Labor and Pensions (HELP) Committee are expected to release their own version of the student loan reform legislation shortly. While the Senate committee will likely stick to the same broad outlines as the House, it could make a few key changes that would significantly strengthen the measure.

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After Tuesday's surprisingly one-sided hearing before the Senate Banking Committee on the credit crunch, it's clear that Congress is prepared to take steps to add liquidity to the student loan marketplace. But as lawmakers move forward with plans to bailout student loan giants like Sallie Mae, they shouldn't forget about the financially-distressed borrowers who have been victimized by the lenders' predatory private loan practices. Surely, they deserve a helping hand too.

Over the last two years, we at Higher Ed Watch have written extensively about how loan companies' aggressive marketing practices and cozy relationships with colleges have pushed students to take on unnecessarily high levels of expensive private student-loan debt, often before they have exhausted their lower-cost federal loan eligibility. In fact, at least one in five private student loan borrowers take out a private loan before they exhaust safer, cheaper federal Stafford loan options.

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