Neb. senator takes issue with student loan stance

U.S. Sen. Mike Johanns said Thursday that his concern for Nebraska families is what's driving his opposition to legislation that would turn control of student loans over to the government - not lobbying from private student loan provider Nelnet Inc. of Lincoln.

The Nebraska Republican took umbrage with U.S. Education Secretary Arne Duncan's recent warning to colleges and universities to be ready to offer direct loans to students by next school year.

Johanns said Duncan's call is presumptuous since the bill has not yet been taken up by the Senate. The student loan reform bill did pass the U.S. House in September.

"There is dissension on both sides of the aisle relative to this proposal," said Johanns, a U.S. Agriculture Secretary under the Bush administration. "A secretary should never be getting this far out in front of the policy choice being made by the Senate and the House."

Asked if his relationship with Nelnet, one of the nation's largest student loan companies, plays a part in his opposition, Johanns said he has "little contact with them."

The Center for Responsive Politics said Nelnet contributed $24,200 to Johanns in the 2008 election cycle.

That put the Lincoln, Neb.-based student loan company as Johanns' third largest contributor - behind Altell Corp. and ConAgra Foods - in his race for the Senate.

But Johanns said he is opposed to direct government lending of student loans because of the impact it would have on "about 1,000 families in Lincoln," with members who work for Nelnet.

"What affects me most are the people who are there who have mortgages to pay and bills to pay, and all of those things, and I just don't think you should make this decision lightly," Johanns said. "It's not just our state; this industry has a presence in many states across the country."

The House bill would end government subsidies for private lenders, boost Pell Grants for needy students and create grant programs to improve community colleges and college graduation rates, among other things.

Ending private loan subsidies and having the government issue loans directly to students would save taxpayers an estimated $47 billion over 10 years when administrative costs and market conditions are considered, the Congressional Budget Office has said.

The reforms threaten at least 30,000 jobs, according to student loan companies.

Nelnet President Jeff Noordhoek has said his company should be fine even if the legislation is enacted, because it has developed new revenue sources besides student loans. Also, he said, the company is one of four lenders with a contract to service direct loans made by the federal government.

But Noordhoek has said he believes the proposed reforms would force some companies out of business and lead to the elimination of some jobs at Nelnet.