Thursday, March 09, 2006

SL Consolidation= Gross Monopoly

I missed this column the first time, but I'm posting it again from the Providence Journal:

Republican legislation to kill competition for the 30 million people who hold student loans did not get that much attention in December. Most people have been focused on how Congress raised interest rates on these federally guaranteed loans. But this action to restrict competition is potentially more far-reaching, and more damaging to students, and to efforts to reduce the federal budget deficit.

It happened two ways: First, Congress maintained a law called the Single Holder Rule, which says that once you have your student loan from one company, you cannot change companies. Second, once you refinance the loan, you cannot do so again, no matter if a different company offers better rates, longer terms or better service.

Imagine if someone tried to get away with that in the home-mortgage market. They would either go out of business or go to jail for price-fixing -- or both.

Then Congress went one step further. Led by Congressman John Boehner (R.-Ohio), then head of the House Education Committee and now House majority leader, Congress took the single most anti-competitive provision in all of American law since the wage and price controls in the early '70s, and made it worse. Congress effectively banned anyone from locking in low rates for longer terms.

The people at the largest student lender, Sallie Mae, were ecstatic. They had beaten their competition -- not in the marketplace but in the lobbying place.

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