Loan bill aims to open agency to competition

PHEAA would be required to share student information with other lenders.
HARRISBURG (AP) -- A bill to change Pennsylvania's state-run student loan system aims to make the agency more open to competition, and backers say the proposed changes could save students and their families millions of dollars.
The biggest change to the Pennsylvania Higher Education Assistance Agency would be to split off its grant-making functions into a new agency. Legislation introduced Thursday also would explicitly require PHEAA to share with other lenders information it collects about loans and grants, possibly for a fee.
"PHEAA's not going to like this, because it's not about PHEAA. It's about creating competition so that we can make [education] more affordable," said state Rep. Kevin Blaum, D-Luzerne, one of the bill's sponsors. "We believe that the competition, when the private sector gets involved, that it is going to reduce the cost of a college education."
Reactions
PHEAA spokesman Keith New said its operating system already is available to lenders at no cost.
"To force us to charge people access to a system that's free and open -- we feel that's anti-competitive," New said. "It doesn't make any sense."
He declined to comment directly on the merits of the pending legislation.
Tom Joyce, spokesman for PHEAA's main competitor, Sallie Mae, said PHEAA has refused to grant Sallie Mae access to its systems in the past, in part because Sallie Mae has opted not to join one of its lending programs.
"If they want to give us access tomorrow to their operating system, without forcing us to join the Keystone lending program and raise prices on students, we'll call them tomorrow," Joyce said.
Sallie Mae's parent company earlier this year offered $1 billion to take over PHEAA.
Law creates new division
The law would create a new entity, the Commonwealth Student Grant and Loan Forgiveness Authority. That is in response to claims during hearings earlier this year on Sallie Mae's since-withdrawn takeover bid that schools were reluctant to do business with other lenders because they feared being shut out of state grants the agency controls.
Rep. Mike Turzai, another co-sponsor of the bill, said separating the grants and loan-forgiveness functions would better allow PHEAA to focus on its core mission of providing student loans.
"What is PHEAA's goal? If PHEAA is in the student loan business, then it ought to be in the student loan business, and another part of government can focus on the grants and the loan-forgiveness aspects," said Turzai, R-Allegheny.
Creating a new agency may not be much of an improvement, said Barbara Schmitt, Mansfield University's financial-aid director and president of the Pennsylvania Association of Student Financial Aid Administrators.
"From a school's perspective, they're already very separate," she said. "We deal with the loan division, and we deal with the grant division. There doesn't seem to be any gray area."
The bill also would state that PHEAA -- as well as the new grant and loan-forgiveness entity -- are subject to the state Right-to-Know Law, but New said that is already the case. PHEAA is currently litigating a dispute with The Associated Press, The Patriot-News of Harrisburg, and Pittsburgh television station WTAE-TV over the release of spending records for board meetings.
PHEAA's board includes eight members of the state House, none of whom signed on to co-sponsor the bill.
Sallie Mae gave $500 to Blaum's re-election campaign in February.
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