Bush administration realizes it doesn’t have authority to fix student loans

In an unsual admission for this administration (just talking factual here, nothing else implied), the Bush administration admitted it doesn’t have the authority to fix the student loan crisis, and that Congress must fix it.

Here is an excerpt from the Chronicle of Higher Education. You may need a paid subscription to view the entire artcile.

The Bush administration called off internal deliberations over a bailout plan for student-loan companies
after concluding it did not have the authority to act on its own, instead endorsing a Congressional
proposal that would allow the education secretary to purchase loans from private lenders.

Education Secretary Margaret Spellings, after weeks of discussions within the administration, joined her
colleagues at the White House and Treasury Department in telling Congress that they see no legal option
for putting in place an industry-backed proposal to use the Federal Financing Bank to supply funds to
cash-strapped student-loan companies.

…

The decision leaves Congress facing a ticking clock for solving a student-loan “crisis” that some
legislators aren’t sure yet exists. The members are also caught between industry lobbyists who feel the
authority proposed for the education secretary may offer them little real help and student-aid advocates
worried about setting a framework that might enable abuses.

The proposed authority for the education secretary appears to offer lenders nothing more than funds to
cover the cost of writing their loans, said Sameer Gokhale, an industry analyst with Keefe, Bruyette &
Woods. “That’s not really a viable option for many lenders,” meaning they might not continue to
participate in the government-subsidized system, Mr. Gokhale said.

At the same time, some student-aid lobbyists have expressed concern that the plans under consideration
in Congress, especially the version pending in the Senate (S 2815), contains enough loopholes and uncertainties that loan companies could profit by dumping only their lowest-value loans on the federal
government and keeping the more-profitable loans for themselves.

…

Congress faces a difficult challenge writing a plan that will be fair to all sides and doing it quickly
enough - within a few weeks - to make a meaningful difference for college students who might
encounter problems finding a willing lender for this coming academic year, said Terry W. Hartle, senior
vice president for government and public affairs at the American Council on Education.