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House revamps college loans

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Posted: Friday, September 18, 2009 12:00 pm | Updated: 8:14 am, Thu Aug 16, 2012.

By Rebecca LaFlure

Killeen Daily Herald

In a vote that could have major ramifications for the local Sallie Mae office, the U.S. House of Representatives approved a bill Thursday that would prevent private-lending companies from issuing student loans.

House Bill 3221, championed by President Barack Obama, would boost funding for low-income students to go to college, and save taxpayers nearly $90 billion over the next decade.

If signed into law, it would be the most radical restructuring of college-aid programs since their creation. All federal loans would be issued directly by the government instead of through private lending companies such as Sallie Mae.

The House voted in favor of the bill 253 to 171, along party lines. It will now go on to the Senate for further consideration. The legislation would eliminate the private lender option by June of next year.

U.S. Rep. John Carter, R-Round Rock, said the legislation would have a negative economic impact in Central Texas. It would eliminate more than 1,000 jobs in his district, he said, which includes Bell, Coryell and Williamson counties.

"The public-private student loan program that has been in place since 1965 has provided funding for over 60 million Americans to attend college," Carter said in a statement Thursday. "To answer success like that by voting to destroy the system makes no sense for students in higher education."

The bill's ultimate goal is to provide an affordable college education for all Americans. Most of the estimated $87 billion it would save over the next 10 years would go into the federal Pell Grant program, guaranteeing more money for low-income students to pursue a higher education.

"This is an important step toward rebuilding the American econonmy and making sure young people have access to an affordable college education," said U.S. Rep. Chet Edwards, D-Waco, in a statement Thursday. "This bill eliminates wasteful subsidies to pay for these important investments in student aid and reduces the federal deficit by $10 billion."

Sallie Mae, which employs about 400 people in Killeen, would be forced to slash 30 percent of its workforce if the bill becomes law, Sallie Mae spokeswoman Martha Holler said Thursday.

Company officials already cut a huge chunk of its workforce in 2008 after newly passed legislation reduced payments to lenders in the federal student loan program. During the restructuring process, Sallie Mae's Killeen facility laid off more than half of its workforce.

Sallie Mae will still issue private student loans, and have contracts to service all loans after they are made by the government.

The student lender giant has about 8,500 employees nationwide.

Contact Rebecca LaFlure at rlaflure@kdhnews.com or (254) 501-7548.

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