A 3 part argument.
First, the good news on student loans, from the NY Times:
The chairman of the House Education Committee [CA Dem George Miller] has dismissed a last-ditch plea from the private student loan industry and is throwing his support behind President Obama’s plan to end the role of private banks in the federal education lending systems.
Mr. Obama’s plan remains deeply contentious in Congress, and still faces strong opposition from private banks [and Republicans] that for decades have earned big profits for handling federal student loans ...
The president’s proposal, first outlined in his initial budget in February, would save the government roughly $87 billion over 10 years, according to the Congressional Budget Office — money that the White House says should be used to aid impoverished students.
Second, the story offered the typical Republican argument about big government, reducing choice, Obama is a socialist, etc.:
Some Republicans have said that in curtailing the role of private lenders, Democrats are trying to expand government.
Senator Lamar Alexander, Republican of Tennessee and a former federal education secretary, said direct government loans were never meant to monopolize student lending.
"This effort by the Obama administration for a Washington takeover of student loans is just one more example of a long line of Washington takeovers of banks, insurance companies, car companies, health care, that I totally object to," he said.
Third, and unfortunately for the GOP, the article also mentioned some really important details about the "free market" the government was seeking to "takeover":
The federal government already makes some loans directly to students, but most federal student loans are handled by private firms even though there is virtually no private capital available for financing the loans. The industry argues that it provides competition and better marketing and servicing of loans.
The administration’s view, shared by a number of Democratic lawmakers, is that the private lenders should no longer be paid by taxpayers to operate a virtually risk-free business in which they essentially use taxpayer dollars to originate loans, with repayment guaranteed, and then resell those loans to the Treasury.
So let me get this straight. These private financial companies are making billions using public capital (not their own) in a market place made risk-free (because the government takes on all the risk, including guaranteeing repayment) yet the Republicans still argue Obama wants to take over another "free" market.
The fact that the student loan business is transparently as far from a free market as one can get makes it obvious that it is more important to the GOP for their business supporters to get $87 billion than to send millions of additional kids to college.
The parallels to the health care debate, where it's more important for the GOP to side with their insurance business supporters than to provide 47 million Americans with health coverage, are also obvious.
See much more about Obama's health care reform plan.