Boehner cozy with student-loan banks

Rep. John Boehner

TRENDING: Voters blame Biden for border crisis, ready to punish Democrats, poll says

Rep. John Boehner, R-Ohio, a candidate to replace scandal-plagued Rep. Tom DeLay as majority leader of the House, is coming under fire for his close relationship with banks that benefit from federal student-loan programs – something over which the congressman wields considerable influence.

Boehner is chairman of the Education and Workforce Committee and was instrumental in making sure the budget reconciliation bill now awaiting approval in Congress didn't harm banks involved in the lucrative student-loan business – institutions from which he secured $172,000 during 2003 and 2004.

According to columnist Froma Harrop, Boehner originally "had orders to find $13 billion in cuts from the student-loan program. The bankers were initially worried, but Boehner reassured them. 'Know that I have all of you in my trusted hands,' he told the annual meeting of the Consumer Bankers Association, adding, 'I've got enough rabbits up my sleeve.'"

Continued Harrop: "The federal student-loan program has been an open-pit goldmine for banks. The taxpayers guarantee the companies against both deadbeat borrowers and risks posed by rising interest rates. Uncle Sugar even offers a free hedge against changes in interest-rate spreads that could harm the lenders' bottom line. (Other businesses must go to Wall Street and pay for such services.)"

RELATED: Alert for military: Here comes Elena!

Harrop points out the biggest player in the student-loan industry is former quasi-government agency Sallie Mae. The company is now an independent publicly traded company known as SLM Corp. The firm's former CEO, Al Lord, reportedly raked in $225 million from 1995 to 2004.

"Who would have thought that there was that kind of money in a government program designed to help working-class kids pay for college and trade school?" quipped Harrop.

Though a floor on interest rates was eliminated from the student-loan program, other changes put the industry in good stead.

Harrop says Boehner made sure banks could more easily keep borrowers "in their clutches" by making it harder for people who don't earn enough to pay their student-loan debts from entering a special federal program. The congressman also made changes that will reportedly undermine the government's Direct Student Loan Program, which competes with the lending institutions by cutting out the middleman banks.

"As we can see, license to abuse student borrowers is as important to building the banks' fortunes as outright taxpayer subsidies," writes Harrop. "In a hard look at Sallie Mae, Fortune magazine reported on a $38,000 student loan that ballooned to $100,000 after the borrower had been out of work for a while. It found that the annual cost of credit for another person still in school was an astounding 28 percent. That happened after Sallie Mae tacked its exorbitant fees onto its predatory rates."

Sallie Mae, the columnist points out, is Boehner's most generous benefactor.

In announcing his candidacy for DeLay's leadership post, Boehner has cast himself as the candidate for change since his chief rival, Rep. Roy Blunt of Missouri, currently is majority whip.

Commented Boehner: "I think we need to engage in a bit of renewal."

Related special offer:

"Breach of Trust: How Washington Turns Outsiders into Insiders"