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Health legislation to dramatically alter student loan system

2010-03-24T00:00:00Z Health legislation to dramatically alter student loan systemBy JOHN HARRINGTON Independent Record Helena Independent Record
March 24, 2010 12:00 am  • 

Mostly overlooked in the tide of news reports about Sunday’s landmark health care legislation is language in the bill that fundamentally changes the student loan landscape in the U.S.

Starting with the next academic year this fall, federally backed student loans will no longer be made through private lenders, but instead will come directly from the Department of Education.

As a result, the Montana Higher Education Student Assistance Corp., which since 1983 has provided more than $2.4 billion in capital for student loans in Montana, will effectively be out of the business of making or acquiring new student loans. It will continue to hold the loans it made through the last academic year.

But Jim Stipcich, president and chief executive of the Helena-based Student Assistance Foundation, which provides service and support for some 175,000 accounts, including $1.5 billion in existing MHESAC loans, said the changing legislation offers SAF opportunities to grow.

“There’s an opportunity here to grow the servicing portfolio by 100,000 accounts. I don’t anticipate layoffs,” Stipcich said. SAF currently employs 182 people and services a total loan portfolio of around $4 billion, which includes the MHESAC total. “MHESAC will have a loan portfolio with an average life of 10 to 12 years and a final life of up to 30 years. It will manage its financing and manage its portfolio.”

But first, SAF will need to become a federal contractor in order to be able to service the new government loans, a process that Stipcich said has been ongoing for months.

“We have been aware of this legislation for a year and have worked very closely with our congressional delegation,” he said. “We have been positioning SAF to become a federal contractor and to provide these services in this space going forward.”

Supporters of the legislation claim that cutting out the middleman and making loans to students directly from the government will save $60 billion over 10 years. Much of that savings will go to students in the form of Pell grants and other forms of assistance.

Ty Matsdorf, a spokesman for Sen. Max Baucus, D-Mont., said Montanans will see an additional $96.8 million in Pell grants over 10 years, along with $85 million in additional money for Montana’s tribal colleges in the next decade and $7.5 million in additional funds for Montana in College Access grants over five years.

Janet Riis, director of financial aid at Carroll College, said the change to direct government lending is positive for Carroll and for Montana, insofar as the savings generated will go toward more help for students. She cautioned, though, that her outlook could change if SAF doesn’t earn the right to service new loans in the future.

“If it does not happen, we are very worried about the servicing our students will receive from huge national servicers that are the lowest bidder,” she said.

Stipcich also said SAF is creating a wholly owned, for-profit subsidiary to be called Tru Student Inc., to help grow its loan-servicing activities. That subsidiary should be up and running this summer, he said.

Reporter John Harrington: 447-4080 or

Copyright 2015 Helena Independent Record. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(7) Comments

  1. Purple
    Report Abuse
    Purple - March 26, 2010 9:19 am

    That $60.00 you are so worried about goes towards the wages and benefits of NON-government employees.

    You can bet that by the time the GOVERNMENT employee has received their wages and benefits that $60.00 you are so worried about will more likely be closer to $300.00 -- WHAT A BARGAIN.
  2. CAG123
    Report Abuse
    CAG123 - March 24, 2010 11:39 pm
    Don't stop now, there's a lot of "nationalizing" yet to accomplish for you "We know what's best for you" lefties!!!
  3. jgoerke
    Report Abuse
    jgoerke - March 24, 2010 8:11 pm
    mtbiker, you are joking, correct?

    You are saying the very definition of capitalism is corporate welfare? Private businesses competing in the open market instead of the government controlling every aspect of an economic sector is corporate welfare? Seriously?

    You would have fit in well in the Soviet Union. They had no "corporate welfare"! Government controlled everything, their healthcare, their government loans, their property, their jobs, their individual money. Everything. Sound familiar? Every single one of these things is handed over to the US Government in this bill.
  4. ILike2comment
    Report Abuse
    ILike2comment - March 24, 2010 3:53 pm
    I'm really failing to see how student loans can be connected to health care reform? Furthermore, the government doesn't have 1 successful socialist program yet it thinks it needs even more control? we should throw every one of these bums out on the street come election time; what a bunch of idiots!
  5. ibdarn
    Report Abuse
    ibdarn - March 24, 2010 3:44 pm
    There most likely is no connection. It is just another excuse. Hopefully people are over their "change" as that is all they have left in their pockets now. Eyes open for election time.
  6. mtbiker
    Report Abuse
    mtbiker - March 24, 2010 12:35 pm
    This is a question of efficient (dare one say, conservative) use of tax money. Saving $60 dollars that would otherwise go to middlemen and using that money to make higher education available to more students seems win-win to me. Making federal loans through private lenders is just another form of corporate welfare and waste.

    The whole healthcare reform effort brings to mind something a friend once said to me, "You cannot trust republicans to do a good job with government for the same reason that you cannot trust a vegetarian to make a good boeuf burguignon stew: one cannot perform a task well if she fundamentally does not believe in it."

  7. Therightchange
    Report Abuse
    Therightchange - March 24, 2010 5:10 am
    Perhaps the Liberal media can explain to us unwashed masses what the relationship is between student loans and health insurance? If you acutally believe that the process of getting a student loan will be easier then of course we have some prime realistate that you should be interested in just west of San Francisco. The student loan program will no longer produce a profit but like so many other government run programs will show huge deficits very soon.

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