Sen. Jim Rhoades and Rep. Jess Stairs Introduce Legislation to Spur Competition and More Funding in Higher Education

The Higher Education Student Opportunity Act draws overwhelming support in both chambers as majority of lawmakers co-sponsor sweeping proposal

HARRISBURG (Nov. 5, 2005) The chairmen of the Senate and House Education Committees today introduced sweeping legislation designed to make college more affordable for Pennsylvania families while ensuring greater financial relief for soldiers and nurses pursuing higher education opportunities.

State Rep. Jess Stairs (R-59) and Sen. James Rhoades (R-29) introduced. The Higher Education Student Opportunity Act in their respective chambers. The legislation will require corporations such as the Sallie Mae Corp., originally created by the federal government as a Government Sponsored Enterprise (GSE), to make good on the substantial investment taxpayers have made in its creation.

"First and foremost, our legislation is designed to ensure an open, fair and competitive marketplace for students -- as well as institutions -- seeking loans. The more honest competition we have, the more Pennsylvania families will benefit," said Sen. Rhoades. "At the same time, we want to expand public service initiatives that have benefited so many of our constituents. So if we're going to let other companies come in and take over some of these services, then the system has to be fair and everyone has to play by the same rules."

A majority of each chamber have signed on as co-sponsors of the legislation. In the House, 121 members have signed on. In the Senate, 35 members have agreed to sponsor the legislation.

"We're very pleased that so many of our colleagues recognize the stakes here and have stepped up and agreed to support this critical legislation because they understand that this boils down to providing affordable access to higher education for more Pennsylvania families," said Rep. Stairs.

Added Stairs, "If student lenders want to do business in Pennsylvania, they should be committed to the same public service initiatives as our state-run agency -- ensuring that our students and families do not lose while paying the price for higher corporate profits," said Rep. Stairs. Sallie Mae received millions of dollars in startup funding and tax breaks from our federal government -- and they weren't required to give anything back. Their bottom line keeps growing for their stockholders, rather than the public who shelled out the money to get their business started. This is an oversight that we seek to correct in Pennsylvania," Stairs added.

The bill will prohibit student loan lenders from engaging in the anti-competitive practice of offering inducements, or withholding discounts, to colleges and universities in order to compel them to use a designated student loan agency.

It also will require former Government Sponsored Enterprises (GSEs) such as Sallie Mae, to provide the same public service programs and fund them in the same amount as PHEAA does. This would include Armed Forces Loan Forgiveness, Early Education Loan Forgiveness, Nursing Loan Forgiveness and Academic Excellence Scholarship Award programs.

"Preserving these opportunities, even with other companies, is the best thing we can do for students who want to further themselves," noted Rhoades. "PHEAA reinvests in Pennsylvania's future by distributing over $100 million to public service initiatives each year. We need to make sure these programs stay in our state and not watch funds migrate out of Pennsylvania."

It would also require former GSEs to contribute the same percentage (7.5%) of its Pennsylvania earnings to the state grant programs as PHEAA does each year.

Rep. Stairs and Sen. Rhoades both noted that they will be paying close attention to the upcoming meeting of the House Consumer Affairs Committee in the Lehigh Valley which will focus on Sallie Mae's relationship with Lehigh Valley College and its lending practices. The Attorney General's Bureau of Consumer Protection is conducting an investigation into the loans as well, according to The Morning Call newspaper of Allentown.