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Federal student loan bill threatens VSAC

Colchester, Vermont - March 13, 2010

A plan to add a federal takeover of student loan programs to the big health care bill is raising questions in Vermont. The main concern is that ending federal subsidies for private student loans would decimate the Vermont Student Assistance Corporation. But the way it's being advanced is raising eyebrows as well.

The question arose as hundreds of Vermont high school sophomores and juniors gathered at Saint Michael's College Saturday for a program called College Pathways, sponsored by VSAC. The non-profit student loan organization funnels millions of dollars to college students and also advises college-bound students and their families about the details and options for financial assistance.

But all of this is likely to change. A bill that's already cleared the U.S. House and awaits action in the Senate would consolidate student loans under a government program, taking them out of the private sector. It means that VSAC would lose most of its reason to exist.

VSAC Director Don Vickers told Channel 3, "We've been working very hard with Senator Leahy and Senator Sanders' office and Congressman Welch's office to make sure that there's a carve-out for non-profit organizations like VSAC to continue to provide services to Vermonters, and to continue to provide loan services to Vermonters. And we're waiting to see what actually comes out as soon as they go forward with the health care bill, they'll go forward with the student loan bill at the same time."

Supporters of VSAC were surprised to learn that the federal takeover of student loans was attached to the massive health care bill. That's because neither measure apparently could get sixty votes in the Senate. And so the plan is to pass both as a package under budget reconciliation, which needs only a simple majority. As well, some Congressional Democrats have suggested that attaching student loans to health care could help attract more votes for the health care bill.

But Gov. Jim Douglas was taken aback. "I'm surprised to see it attached to the health care reform bill," he said. "It seems to me that each is controversial enough on its own." Douglas says the student loan bill will hurt Vermont. VSAC employs 350 and helps put high school students on the path to college. It stands to lose up to 200 of those employees if the government takes away its business. Douglas says he's not buying arguments that a government-administered program would be better. He said, "They call organizations like VSAC 'middle men,' they want to cut out the middle men and theoretically save money. But I can tell you from my own experience and my own family, VSAC has loan rates that are much more favorable than other options that I've seen... So I think it would be a big mistake for the Congress to take this step."

With so much at stake for students, their families and VSAC, everyone is watching and waiting. With the power out of their hands, that's all they can do.

Andy Potter - WCAX News