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The Obama administration says it will save tens of billions of dollars by taking over the student loan industry. Lenders have resisted the proposal, saying students should have a choice between government loans and those provided by the private sector. Well, now, lenders are offering a new argument against the plan, that it would kill jobs.

NPR's Larry Abramson reports.

LARRY ABRAMSON: Earlier this week, the nation's largest student lender, Sallie Mae, held a town hall for the 700 employees at its student loan servicing center in Wilkes-Barre, Pennsylvania. The company announced triumphantly it is returning 2,000 call center jobs to the United States from overseas.

Martha Holler is a Sallie Mae spokesperson.

Ms. MARTHA HOLLER (Spokesperson, Sallie Mae): We realized that the value of bringing these jobs back to the U.S. means more to us than any savings that we can achieve by keeping that work overseas.

ABRAMSON: The lending giant says the move was prompted purely by patriotic spirit. So is there any connection to the administration's plans to nuke the industry by issuing all federal student loans through the Department of Education? Spokesperson Martha Holler would only say Sallie Mae does want the administration to rethink that plan.

Ms. HOLLER: We support constructive alternatives that would generate a similar level of savings that could be used to achieve those goals.

ABRAMSON: In fact, supporters of the current system, which sends most loans through banks, are mounting a quiet lobbying campaign to save the industry. And in this economy, preserving local jobs could be a potent argument.

Ms. MARY KOSIN (Financial Aid Director, Luzerne County Community College): I don't think the government is aware that we're talking about thousands of people losing their jobs.

ABRAMSON: Mary Kosin directs financial aid at Luzerne County Community College in Pennsylvania, just down the road from Sallie Mae.

Ms. KOSIN: In a time where we're told the economy is so bad and it could take years to recover, what is the logic with that?

ABRAMSON: Ditto for New Mexico State Treasurer James Lewis.

Mr. JAMES LEWIS (State Treasurer, New Mexico): And with the employment situation as it is today, that is something that I'm concerned about.

ABRAMSON: Lewis, a Democrat, has sent a letter to the president warning that New Mexico would lose over 170 jobs to the plan. But administration officials say the jobs argument is a red herring. Bob Shireman, senior adviser to Education Secretary Arne Duncan, says he only wants the government to issue the loans. Private-sector workers would still get paid for servicing them.

Mr. BOB SHIREMAN (Senior Advisor to Education Secretary Arne Duncan): There are the same number of servicing jobs, which means the collection on the loans, sending out the bills, answering borrowers' questions on the phone.

ABRAMSON: Beyond the jobs issue, private lenders say they are good neighbors and offer discounts on loans to students. Mary Kosin of Luzerne County Community College says that could disappear if the government takes charge.

Ms. KOSIN: Where is the government going to get the funding for that? Why would they offer the same incentives? My word is choice. This is still America. Students should be able to choose.

ABRAMSON: Choose between government-provided loans and those that go through banks, as they can now. The Education Department's Bob Shireman says this isn't some choice between the free market and a government bureaucracy. The government currently takes all the risk by guaranteeing the loans that go through banks.

Mr. SHIREMAN: What some of these companies really want is they want the taxpayers to take the risk, which they do in the federal student loan program, yet the company wants to keep the interest income, earning a small percentage on a huge pot of federally backed money.

ABRAMSON: The administration announced the loan overhaul to significant fanfare, but the lobbying against it is growing. And a spokesperson for the White House Education Committee says the White House proposal is just one of the options under consideration. Larry Abramson, NPR News.

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