Kerry pitches auction plan for student loans

The Democrat wants banks to bid for the right to confer student loans.

Amy Horst

Democratic presidential hopeful Massachusetts Sen. John Kerry proposed a plan Thursday that would change how banks make student loans and would increase funding for a national volunteer program.

Under Kerry’s program, banks would bid in government-sponsored auctions for the right to make student loans. The money the program saves would go toward increasing the number of AmeriCorps volunteers by 425,000 within the next decade.

AmeriCorps volunteers work in U.S. communities for one or two years. In return, the government helps them pay for college, vocational school or student loans.

Colleges and universities must do all they can to decrease rising costs, and Kerry’s plan helps with that, said Bill Burton, a spokesman for Kerry’s campaign.

“(President) George (W.) Bush has offered no way to make college more affordable to students and their families,” Burton said. “It’s easy to snipe from the sidelines, but actual change requires leadership like (Kerry) has shown.”

But Bush’s campaign officials said Kerry’s plan is unworkable.

“Kerry’s auction plan increases government bureaucracy and hurts students,” said Sharon Castillo, a spokeswoman for Bush’s campaign. “Also, students would all bear the burden of adjusting to this new system.”

Castillo also cited a 2001 government study of options for financing and running the student loan system.

The report stated the auctions would need a large number of bidders to decrease costs otherwise costs would increase. Using an auction plan, the small number of banks offering student loans could also cause an increase in costs, according to the report.

Higher education officials said they agree with what Kerry is trying to do, but most wanted to hear more details of how the program would work.

“I think the idea of inspiring prospective college students and current college students to be engaged in local communities is on target,” said Mark Langseth, executive director of Minnesota Campus Compact, a coalition of 49 colleges and universities – including the University – that aims to increase campus involvement in the community and civic life.

“But there are many different ways to encourage such involvement, and certainly the Kerry proposal is one of the more controversial,” Langseth said.

But he said the plan deserves serious debate, and said it could be useful to students if designed properly.

Debra Pusari, associate director of graduate and undergraduate services, said she liked the sound of the proposal but would also need to know more before reaching a conclusion.

“I think there is a lot of money made by the banking industry with student loans, so looking at the program and seeing if there’s any way to divert the money back to students or needy communities is a good thing,” Pusari said.

So far this academic year, the University has dispersed $151,234,533 in direct subsidized and unsubsidized loans, she said.