You are currently viewing the printable version of this article, to return to the normal page, please click here.

Rocky kickoff to changes for student loans

- The Washington Times - Wednesday, March 31, 2010

The government's Web site for handling student loans was broken most of Tuesday — the very day President Obama signed a law putting the government in charge of all subsidized student lending.

Visitors to the site www.studentloans.gov early Tuesday afternoon saw an error message, while users Monday saw either an error message or, in the evening, were simply unable to connect to the site at all.

The site was working again by late Tuesday, but critics said the technical problems underscore their concerns about turning such a major program over to the federal government.

"This is a case study in what happens when the federal government takes over a function of the private sector. On its first day of operation, the federal student loan program has collapsed into a black hole from which no information can escape," said John Hart, a spokesman for Sen. Tom Coburn, Oklahoma Republican.

Multiple messages for comment were left with the Education Department on Monday and Tuesday. On Tuesday afternoon, a spokesman e-mailed that officials were "checking" on the matter.

David Barron, head of the Oklahoma Association of Student Financial Aid Administrators, said finance officers had gotten assurances the department would be ready, and the fact that the Web site was down undermines those assurances.

"To me, that shows a broken promise," he said.

Mr. Barron said universities have been sending e-mails in recent days telling students they'll need to go to the federal Web site to get a new Master Promissory Note for their loans, and for the past several days the students have encountered an inaccessible site.

Mr. Obama signed the loan changes into law as part of a package of fixes to the health care law he signed just last week. The two measures had to be combined in order to pass through the complex budget process, which allowed Democrats to avoid a Republican-led filibuster in the Senate.

The health care fixes included aid for seniors who face a gap in Medicare prescription drug coverage, higher funding to states for Medicaid and a delay in taxes on high-cost insurance plans.

Democratic leaders in Congress earlier this month tacked the student loan overhaul onto the health bill Mr. Obama signed. But the Internet glitch provided an embarrassing kickoff for the changes.

The federal student loan programs' director, in notices posted on the department's Web site, acknowledged the site was down for parts of both Monday and Tuesday.

William Leith, the program director, said Education Department officials thought they had fixed the issues Monday and had not anticipated the problems stretching into a second day. He apologized for the breakdown, but did not explain what the problems were.

Mr. Obama, who signed the bill at an event at Northern Virginia Community College, said the student loan changes signal the end of a 20-year battle with private student lenders, who fiercely fought the overhaul.

Under the new student loan rules, the government will no longer rely on private banks to issue loans, and will instead lend the money itself at the same fixed interest rate of 6.8 percent. Repayment terms for students who keep up payments after graduation were also eased.

Government-backed loans at private banks will end July 1, and schools have been given three months to move over to the new government-run program.

"By cutting out the middleman, we'll save American taxpayers $68 billion in the coming years — $68 billion. That's real money," Mr. Obama said.

The government is planning to spend that money on increasing Pell Grants for low-income students and on aid to historically black colleges.

Democrats believe the changes are good politics, too. Democratic National Committee Chairman Tim Kaine joined the College Democrats of America on Tuesday afternoon for a press conference call with college reporters to trumpet the new law.

Mr. Kaine said that, combined with health care, the measures were "the culmination of a breathtaking week of campaign promises met."

Critics, though, warned the Education Department is not ready to handle the loan program.

"Is anyone surprised to see a massive government bureaucracy having technical difficulties?" said one congressional Republican aide involved in education policy. "There's a reason no one likes going to the DMV. Unfortunately for students, now there's nowhere else to turn."

The broader decision to nationalize loans has also come under fire.

Sen. Lamar Alexander, Tennessee Republican and a former education secretary, said the government could lend the money at a lower rate and save students money, but instead the government will keep the interest rate at 6.8 percent.

He also said borrowers should be frightened by having to deal with government bureaucrats at federal call centers, rather than with loan specialists at banks.

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.