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New U.S. Rep Allen West missed the mark: universities aren't under federal control

U.S. Rep. Allen West, a Republican from South Florida who took office Jan. 5, has a beef with government takeovers.

On Fox News Jan. 2, West said, "When you look at the things that happen in our country and the nationalization of so much of our production — being it an automobile industry, being it a health care industry, being the fact that we had an amendment in the health care law that said the federal government is going to take over education."

A day later, on CNN, he again spoke critically about health care legislation connected to a change in education loans, saying: "I'm waiting for someone to explain to me what does government control of college education loans have to do with health care, which was part of that law."

We wanted to know what West was referring to about "an amendment in the health care law that said the federal government is going to take over education." And is he right about it?

We asked West spokeswoman Angela Sachitano for an explanation of what amendment West was referring to and how it constituted an education takeover.

We also looked for a link between government control of college education loans and the 2010 health care bill, and found that President Barack Obama promised to "eliminate wasteful subsidies to private student lenders, which will save nearly $6 billion dollars per year."

There are basically two kinds of college loan programs: the Federal Family Education Loan Program, in which private lenders make and secure loans to students and receive subsidies from the federal government, and the William D. Ford Federal Direct Loan Program, in which the federal government directly loans to students. Obama sought to shift student lending away from the private loans to the government's direct loan program, which he regarded as more efficient and cost-effective.

On March 30, Obama signed legislation, which was part of the health care bill, replacing the private lending program with 100 percent direct lending, effective July 1.

The nonpartisan Congressional Budget Office has said the student-lending changes will save the government nearly $61 billion over 10 years.

Sachitano sent us a copy of a March 21 New York Times article about the House voting to revamp the student loan program as part of the reconciliation bill that included the health care law. Nothing in the article suggests the move was a federal government "takeover" of education. The article did state that: "Private banks lobbied against the student loan changes, which eliminate a long-flowing source of revenue for them."

We spoke with three experts on higher education, who concluded that the changes in the loan program didn't constitute the federal government taking over education.

Terry Hartle, vice president of the division of government and public affairs at the American Council on Education, said when the federal student loan program started in 1965, banks provided student loans that were guaranteed by the federal government. In 1993, then-President Bill Clinton said it would be better for the government to make loans directly. Congress didn't want to do away with the loan program involving private banks, but agreed to add a direct federal loan program. Two programs co-existed for many years, until the reconciliation act in 2010.

"Very few students will notice any difference in their loans because of the change," Hartle said. "They are filling out the same loan application, it just goes to a different post office box.'' The loan is held by the U.S. Department of Education. The department will hire contractors, which might be Bank of America, Citibank or SunTrust, to manage the loan portfolio. It's cheaper for the department to make student loans this way, he said.

Colleges will notice some differences — the financial aid employees are now dealing with the federal Department of Education rather than several banks.

Barry Toiv, vice president for public affairs at the Association of American Universities, is a former deputy press secretary under Clinton. He said the change "didn't take banks out of the program completely because the private sector still administers the loans for the Department of Education.'' But the banks are no longer the actual lenders. Opponents did refer to it as a federal "takeover'' of student lending, he said. The proponents argued that it's always been a federal program.

"This has no impact at all on the management of colleges and universities," Toiv said.

Stephanie Brown, associate vice president for enrollment and student services at Nova Southeastern University in Broward County, agreed, saying it's not a takeover and the process is simpler for students who don't have to research multiple lenders.

So, has the government seized control of education?

West said: "We had an amendment in the health care law that said the federal government is going to take over education." But the federal government was a major player in student loans for years before Obama signed the health care law. And it doesn't mean that colleges are now under the control or management of the federal government. We rate this claim False.

Edited for print. For more, go to PolitiFact Florida.

The statement

"We had an amendment in the health care law that said the federal government is going to take over education."

Allen West, Jan. 2, in a Fox News TV show

The ruling

The federal government was a major player in student loans for years before President Barack Obama signed the health care law. And the law doesn't mean that colleges and universities are now under the control or management of the federal government. We rate this claim False.

New U.S. Rep Allen West missed the mark: universities aren't under federal control 01/16/11 [Last modified: Sunday, January 16, 2011 11:03pm]

    

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