Matan Ariel and Nate Walker have a modest proposal. The Columbia University students would like to see about $30 billion in federal higher-education spending transferred from the coffers of the big student lenders to the pockets of needy students. Their plan is called the National Tuition Endowment, for which they and a small group have spent over a year gathering the endorsements of hundreds of student governments, the United States Student Association, and the state PIRGs. A nationwide coalition of students and their supporters met November 3 and 4 at Columbia University to hash out the details of the proposed legislation. Once it has been submitted for approval by activists around the country, Ariel and Walker will be looking for sponsors to get the bill before the House and Senate.
The two make an unlikely pair. Ariel, 25, grew up in Israel and served three years in the army there before coming to Columbia, where he is a political science major in the School of General Studies for adult and part-time students. Walker, 29, is a candidate for Unitarian Universalist minister from Nevada completing a doctorate in education. What they have in common is a passion for student government, a mountain of student loan debt—approaching $100,000 for Walker—and a desire to find new solutions to the problem of paying for college.
“Last May the School of the Arts at Columbia was protesting another tuition increase,” says Walker, “and I said to one of my fellow University Senate members, ‘Wouldn’t it be great if all the students in America would get together to protest higher tuition?’ Because it affects everyone.” But in order to effectively protest, they believed, they would have to come up with a positive proposal. With more patience than most, Walker and Ariel set about identifying “inefficiencies” in the current loan system. For example, the student loan default rate hit a record low of 5 percent last year, yet lenders annually receive hundreds of millions of dollars in default subsidies.
The National Tuition Endowment proposes to get rid of those subsidies, for a projected savings of $3 billion over the next decade. And that’s just the beginning. They want to close a loophole that allows student lenders to collect 9.5 percent interest from the government on certain loans—that’s $10 billion. They want to stop local and state student loan agencies from financing loans with tax-exempt bond issues—another $10 billion. “Why should a for-profit company get tax-exempt bonds?” asks Walker. And they would like to see the income from students’ own interest payments and loan consolidation, which now goes back to the Treasury, returned to the tuition endowment.
If the big student loan companies no longer have special privileges, Ariel and Walker argue, a truly open market in student loans could grow, with local credit unions perhaps playing a greater role. In this way, their proposal contrasts with the Student Aid Reward, or STAR, Act, introduced in the House and Senate last year, which would save between $17 billion and $60 billion in the next 10 years by encouraging colleges to switch to direct loans; the savings would be applied toward the Pell Grant program. Yet both plans have the same fat target: the outsize corporate profits in the current system. Last year Sallie Mae, the largest student lender and originally a publicly chartered corporation, had the second-highest return on revenue in the entire Fortune 500.
The students realize that they will have tough going politically. The version of the Higher Education Act recently passed through the House Committee on Education and the Workforce did include some cuts to lender subsidies, but the money is earmarked to feed the gaping federal deficit. And with below-inflation increases to the Pell Grant over the next five years, the climate for more need-based student aid is not good. But Ariel and Walker project an unshakable confidence. “We believe that they will pass this because it’s coming from students,” says Ariel. “This is more than a bunch of students yelling, ‘We want more money.’ We’re saying, here are inefficiencies in the system. Make it work better and there’ll be more money.”
This article from the Village Voice Archive was posted on November 8, 2005