Last month, New Hampshire Senator (and Vice Presidential aspirant) Kelly Ayotte claimed the federal government has taken over the student loan industry and is using the profits to pay for health care reform.
“Under the Affordable Care Act, which amounted to a federal takeover of the student loan industry, the government borrows money at 2.8 percent and then loans money to students at 6.8 percent. Government profits are then used to help pay for the health care law,” Ayotte asserted.
PolitiFact New Hampshire researched Ayotte’s claim. They contacted Ayotte’s legislative office to get sources for the claim and interviewed a spokeswoman for the Senate Committee on Health, Education, Pensions and Labor as well as the Director of the Federal Education Budget Project at the New America Foundation.
Their conclusion? Ayotte’s claim was Mostly False.
The government’s Reconciliation Act of 2010 was not a takeover, but rather an elimination of a federal student loan program the government had used since 1965. Private companies are still involved in servicing the program and private lenders can still make their own student loans without a government subsidy.
The government does borrow in the 2.8 percent ballpark and loans money to students at 6.8 percent but the difference is not a profit, it helps compensate for the unanticipated losses inherent with any loan. Finally, the money saved in the Reconciliation Act of 2010, not “profits” from the direct loans, is used to fund elements of the Affordable Care Act.