Government should handle all student lending
San Jose Mercury News | McClatchy-Tribune News Service
Issue date: 3/3/10 Section: Op/Ed
Given a choice, would you use taxpayer money to subsidize banks, or to help students pay for college?
It's rare for a public policy question to be this big a no-brainer. But that's the right way to describe the Obama administration's proposal to save an estimated $80 billion over 10 years by making all student loans directly through the government rather than private lenders, and direct that money toward education programs.
The House has passed legislation to eliminate the middleman - companies such as Sallie Mae - from the process, but the proposal is stalled in the Senate amid filibuster threats.
U.S. Education Secretary Arne Duncan wants to use the money for programs that help students get to college and succeed there, crucial steps for the country if U.S. companies are to compete globally long-term. The biggest of these programs is a $40 billion increase in Pell Grants, which would improve affordability for students now and reduce indebtedness later.
The plan also includes $8 billion for early childhood education, an essential ingredient for success later in life, and more money for community colleges, low-interest Perkins loans and college-tuition tax credits.
In concept, the proposal isn't that dramatic; the government already makes the majority of student loans. However, a very profitable slice currently goes through private companies that lend out federal money and collect fees and interest, even though taxpayers bear the risk of default. This piece of the market would be eliminated.
Lenders, supported by some lawmakers from both parties, are arguing against the plan, trying to protect what Duncan calls their "free ride." Perhaps sensing that public opinion isn't on their side, they've suggested an alternative that would limit their profits but also save the government far less.
One of the primary arguments against the bill is that it represents a government takeover. But this argument is purely political, not substantive, as the government provides virtually all the capital for student loans already.
It's rare for a public policy question to be this big a no-brainer. But that's the right way to describe the Obama administration's proposal to save an estimated $80 billion over 10 years by making all student loans directly through the government rather than private lenders, and direct that money toward education programs.
The House has passed legislation to eliminate the middleman - companies such as Sallie Mae - from the process, but the proposal is stalled in the Senate amid filibuster threats.
U.S. Education Secretary Arne Duncan wants to use the money for programs that help students get to college and succeed there, crucial steps for the country if U.S. companies are to compete globally long-term. The biggest of these programs is a $40 billion increase in Pell Grants, which would improve affordability for students now and reduce indebtedness later.
The plan also includes $8 billion for early childhood education, an essential ingredient for success later in life, and more money for community colleges, low-interest Perkins loans and college-tuition tax credits.
In concept, the proposal isn't that dramatic; the government already makes the majority of student loans. However, a very profitable slice currently goes through private companies that lend out federal money and collect fees and interest, even though taxpayers bear the risk of default. This piece of the market would be eliminated.
Lenders, supported by some lawmakers from both parties, are arguing against the plan, trying to protect what Duncan calls their "free ride." Perhaps sensing that public opinion isn't on their side, they've suggested an alternative that would limit their profits but also save the government far less.
One of the primary arguments against the bill is that it represents a government takeover. But this argument is purely political, not substantive, as the government provides virtually all the capital for student loans already.
Be the first to comment on this story