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Government Reform Could Change VSAC

Winooski, Vermont - October 5, 2009

Congress is considering a major overhaul of the federal student loan program. But the Vermont Student Assistance Corporation says if it's passed in its current form, the bill would radically change the way it does business and force it to cut hundreds of jobs.

The bill passed the House two weeks ago and is now being considered by the Senate. VSAC says it's hoping the overhaul doesn't get rid of programs that are working well as it tries to reform programs that are not.

Ask any college student or parent, education is expensive. Many are using loans to finance their schooling. A bill before Congress is working to make it more affordable to more students.

"The major thrust of the legislation is to take away the subsidy to the big banks and give it to the kids so it would be a lower cost loans. That's a good thing," said Representative Peter Welch.

Advocates say the bill would save taxpayers $87 billion over the next decade by essentially cutting out the middlemen, the government would make loans directly to students. That could mean lower interest rates and more money available for grants. But it's not just big banks that originate loans, nonprofits like VSAC could also lose their role as lenders.

"We need two things; one, lower cost, more affordable education for our kids this legislation will do that frankly by cracking down on the bank rip-offs. But two, we need good local service and that's what vsac does so we have to make sure they are held harmless and not be put in the same situation as the big banks," said Welch.

VSAC says the bill could have a major impact on how vermont students select and pay for college.

"If you're a Vermonter and this bill goes through, you'd be calling 1-800-somewhere to try to get help with your student loan, and I think a lot of Vermonters are used to calling VSAC and getting the sort of support and assistance they need and i'd rather call locally," said VSAC President and CEO Don Vickers. 

VSAC says the House version of the bill would eliminate much of the funding for counseling students before they get loans. That would mean cutting 200 to 250 jobs.

It is pushing the Senate to allow it to keep lending, a major source of its revenue.

"There is a lot of support for nonprofit organizations like VSAC. when they're going to change something, we don't throw the baby out with the bathwater," said Vickers.

Senator Bernie Sanders says he hopes the law can be written to protect nonprofits like VSAC.

"What we are trying to get is what we call a carve-out. We understand VSAC is not some large multi-national bank, but that they're doing a really good job at the grass roots level keeping kids in college, so we're working very hard to protect VSAC and other state nonprofits so they can continue doing their hands-on, one-to-one type work with working families," said Sanders.

Senator Sanders is on the committee that's considering this bill. He says at this point there is no time frame set for when his committee will take up this legislation. Right now its focus is on health care reform.

VSAC says its already offering rates less than what the government can. It says its saved Vermont families $110 million dollars in the last decade. But this new legislation would take that flexibility away. And that could mean loans here could actually end up costing more.

Kate Duffy - WCAX-TV