We've moved!

Social Icons

twitterfacebooklinkedinrss feed

Monday, March 22, 2010

Congress Hits Double, Passes Student Loan Reform Too!

The health care reforms passed by the House last night is not not NOT a government takeover of health care. Not even close. If it were, I'd really be partying.

But for those of you who need a real socialism fix, Understanding Government reminds us that last night's historic vote did include one honest-to-goodness nationalization of an industry. We got student loan reform! Instead of subsidizing banks to provide federal student loans, Uncle Sam will now kick out the middle man and handle students loans directly. Savings: $61 billion... $36 billion of which goes to expand Pell Grants. Not as big a boost as I was hoping for when SHS voted against this good legislation last fall, but still good news for students and taxpayers alike.

I guess it's not really nationalization to take back a government service that was outsourced to produce an artificial risk-free market. But why quibble: if you wanted socialism to gripe about, student loan reform is as good as you're going to get this week. Go ahead, Republicans: gripe about yet another great piece of Democratic deficit-cutting.


  1. So what if the benevolent fed gov't doesn't deem a person worthy of a loan? What is that person's option? Evidently the gov't is not lowering interest rates though for the struggling students if they plan to redistribute all the interest money they get instead of going to that bad "middle man."

    THis thing had evidently no chance of passing so it was attached to health care of all things. Even my sister, who prefers watching sports to watching news, said that was stupid when I told her. It was. You can celebrate all you want, but I think students would prefer a choice in where to go for a loan vs. only Uncle Sam.

  2. I agree. To that end our kids have saved for college from the time they were little and they were told if they could not afford to go, take a semster off and earn. We helped them all a little. We are not rich. Did it work, In May, the fifth of our six kids will be getting her 4 yr degree. Another daughter is getting her masters. Only one took out a loan, she had taken a 5 yr hiatus from college and when she reached her senior year, she took out a loan for part of that year. That way when they graduate they are under no obligation to anyone and can start fresh. It is worth the wait to do this. They all worked hard and sometimes watched their friends buy new computers and do some things that they could not because they had no extra $$$. Our 6th is only a college sophomore, so the jury is still out there. But the other 5 say it is worth it. I would say that would go double now w/the government holding the purse strings.

  3. Nonnie-

    In point of fact, student loans are already regulated by the government. You only get them if you meet the federal qualifications.

    Using a middle man use to make sense when the default rate was relatively high. The middle man was taking on some risk by putting the loans out. Since student loan reform (no longer able to discharge through bankruptcy), there isn't any risk anymore. So the one reason to have a middle man no longer exists.

    Also, this legislation doesn't prevent private organizations from issuing student loans. It just doesn't provide subsidies to private loan vendors. If you can make money providing student loans without federal subsidization, you're still in business.

    Seriously, anyone who is conservative should be in favor of this legislation.

  4. This is another expansion of the federal government, hiring thousands to implement and handle the loan officer and collection jobs formerly held and funded by the private sector.

    Here's an example of our government programs at their finest. A couple of weeks ago, when Congress didn't pass the 30 day funding extension, the national flood insurance program (NFIP) went black for a few days. No new policies, no claims, no coverage because there was no funding.

    Government, by its nature, is not efficient and the more socialized we become, the less efficient all these programs will be.

  5. You're right, Goldman, those banks are the epitome of efficiency. They didn't need any help from some crappy thing that fixes roads, delivers a letter for under 50 cents, provides national defense, cops, fireman, handles getting refund checks out, etc. etc.

    We definitely need to keep subsidizing banks for doing a job the government was doing. That totally makes this a socialist move.


  6. I have a great idea, get rid of all the banks and have everyone borrow money from the feds discount window. Rates run from 0 to .0025%.

  7. Rod, as you well remember, that hitch in the flood insurance program was caused by a single Republican with a personal grudge against his own leadership. Meanwhile, the bankers caused the recession with their recklessness. All are guilty, are are punished...

    ...and as Adam points out, we already do all sorts of socialist (maybe we should start saying communitarian?) things that do good. Will you be opposing the local opt-out as another socialist power grab?

  8. Cory, the hitch in the flood program was caused by "politics" that could have been either party. I don't like the idea of my inefficient government playing shell games with vital programs like flood insurance. Over the years, our government has partnered with private business (banking and insurance) to provide the services needed for student loans, SBA loans, Medicare Supplements, flood insurance and others at a fraction of the handling cost if government were to provide all the service work itself. Partnering is key to efficiency and competition. Competition and capitalism built the economy of this nation, not socialism.

    To answer your question on the Opt Out. Obama's takeover of student loans and our local opt out are two unrelated subjects. One is a socialist government takeover, the other is a community decision, which I support fully, and I hope with your strong educational beliefs, will also support wholeheartedly.

  9. I just got a glimpse of the libs new word since socialist has such a negative connotation (even though it is the truth). It will be communitarian! Cory used this concept in his other post today: "community is the basis of liberty."

    Global warming became climate change, liberal became progressive, and now socialist has become communitarian. However, a wolf in sheep's clothing is still a wolf.

  10. Linda, communitarian isn't a completely new word. It is a relatively recent (last few decades) response to radical individualism. Clinton used it back in the 1990s... back when I was a Limbaugh Republican and parroted the same charges of masquerading socialism. I know it doesn't really matter what we call it; you'll oppose it. I'm not afraid of that. Communitarian, liberal, progressive: I'll embrace all those words to describe my values. They work. And liberty really does exist only in the context of community.

  11. Rod-

    I'm not sure how the free markets and competition help the student loan program. Perhaps you could illustrate with an example?

    The loan rates and terms are governed by the federal regulations. Every lender offers an identical product. If everyone is selling the same thing, at the same price, how does the free market play?

  12. Tony,

    If it works anything like the Medicare Part D Prescription Drug Plan, National Flood Insurance Program and others, licensed insurance agents offer these products to the public, the government regulates them, but pays a small percentage to the agents to handle the sale and servicing of the products, rather than hire a slew of new representatives as government employees. Very efficient, a trained sales crew of thousands, and it works.

    Same is true of banks making student loans. They provide the trained bank employees on the ground, so the government doesn't have to hire thousands of reps to handle the applications and sale of these student loans. Banks work on a small spread or fees.

    "Instead of subsidizing banks to provide federal student loans, Uncle Sam will now kick out the middle man and handle students loans directly."

    If that statement is true, we can expect a massive hiring of federal employees to handle the sale and servicing of these student loans, which eliminates competition and naturally slows down the process and response time. Where did the savings and efficiency go?

  13. Rod-

    Student loans are issued through the financial services departments of universities. They connect to a federal data base, get approved, and then are sent the paper work to sign. Private sector employees are not involved in the process at all. It's all automated. There would be no need to hire a massive number of new employees to administrate this program.

    Besides, you're a free market guy anyway. If these private providers can offer competitive rates, the students can purchase from them as opposed to directly from the federal government. When the student is in the financial aid office he gets to choose who he gets his loan from. That's how it worked for me anyway (college 2000-2006).

  14. OK, just heard why the student aid loan program was nationalized. The gov't needed more money to "balance" the cost this monstrosity. Isn't that a suprise?! So the govt kicks out the private lenders, borrows money at 2% interest, loans it out at 6.4% or, and pockets the difference straight into the health care bill "income" column. The first of many surprises when, as Pelosi stated, we get to actually see what is in the bill. This actually sounds like a plausible reason for attaching this completely separate issue.

  15. Got a source for what you heard, Linda? It's a pretty remarkable claim, given that it contradicts the actual sources at the top. Is it that unbelievable that the government might do something like this just to save money and make more money available for student financial aid? Believe it or not, not everything government does is a lie or sham or tyrannical plot. Sometimes, government is just good people trying to do good things.

  16. Lynsey Graham stated so on the news tonight, Cory. But I know you won't believe him anyway. After so much lying and chicanery from your side during this "process," I can see where you doubt everything people say! Do you have a source that proves all the money saved does NOT get funneled into health care? Do you have proof of the difference in rates for borrowing and rates for charging students? If the gov't really wanted to pass on the savings to the students, they would charge the same rate as which they were borrowing. And what if the gov't isn't making enough money, can they raise the rates to whatever they want and students will be stuck with having to pay them.

  17. Now, Linda, don't go all evidence-nihilist on me. If you want to adopt that position, we all might as well stop reading and listening and just believe what we want.

    I asked for a source. You said Lindsey Graham said it, but you still haven't told me where that information comes from. Sure, he's a Senator and thus has a more informed opinion than the man on the street. But Senators are also making the absolutely bogus claim that health care reform forces you to pay for abortions.

    The evidence I have cited—and this article in today's news—state exactly where the student loan savings go:

    "The bill would see $61 billion in savings over 10 years from the switch to direct government lending. It would pay for Pell Grants and provide more than $4 billion to community colleges and historically black colleges. It also would direct about $19 billion to reducing the deficit and offsetting expenses in the health care legislation."

    So yes, the government has saved $61 billion dollars. They are using the majority of those savings to fund Pell grants. They are using $19 billion to reduce the deficit and to pay for health reform. So what what problem do you have with government using fiscal responsibility to pay for the programs it passes and provide services more efficiently?

  18. The gov't provides services more efficiently? I think volumes could be written about the ridiculousness of that statement, but I'll let that go.

    I have a huge problem with the gov't nationalizing health care, first of all, when the individual problems with health care could have been addressed without a govt takeover of the whole system and without eventually bankrupting the nation. But I don't believe that Obama cares about the bankrupting the nation part; in fact, it is probably what he has in mind so he can "fundamentally change" America.

    And to sorta balance the books (if a private company balanced the books like the triumvirate is doing with this health care bill, they would be in jail) by taking over the student loan business to take any profit from that to fund health care, this I do have a problem with.

    What business will Obama target next to take over and take the profits to fund health care? He can do it, is doing it, and will continue to do it.

    As for abortion, according to lawyers, an executive order can't supercede a bill and can be rescinded anytime. So Stupak sold out for some airport fixes, and he now looks as corrupt as the rest of that bunch. And if abortion was not covered, Planned Parenthood and Naral et al would be all over Pelosi to make sure abortion was covered. That's proof enough.

    You don't believe my proof when I attribute a statement to a senator, but you follow like sheep when a botoxed up senator tells you this bill is deficit neutral, is the best thing to happen since Social Security, etc.

  19. Nonnie is so off base a comment is necessary. There has been no nationalization of health care, nor a take over. Private and public companies are free to operate. There are reasonable restrictions, compulsory benefits, and the obligation for everyone to purchase coverage (not unlike car insurance). Too many proud citizens of the greatest country in the world are disturbed without being grounded by factual information. That's irresponsible. The health care bill will most likely be perceived as positive over time. Political skanks like Grassley sense this and are already seeking credit for some aspects of the bill:


  20. Sorry, John, I'm more on base than you think. Health insurance is no way comparable to car insurance. You don't have to buy insurance if you choose not to drive. With this new health care bill everyone is mandated to buy health insurance, everyone unless you choose not to breathe and expire, but of course that would be your choice I guess.

    And with regard to abortion, it's in or the pro-aborts would be up in arms, and the Senate bill would contain the House restriction against it.

    It is an admitted fact that money realized by the takeover of student loans WILL be directed to the general fund to help fund the new health care bill. Some might go to increased Pell grants, but the main reason for grabbing this entity is to get the money, not to help students or they would offer a lower rate to students.

    And lawyers have stated that a law supersedes an executive order, and an executive order can be repealed at anytime. So much for the attempt to show that abortion isn't covered.

    John, the ball's in your court, but I'm on base.

    And it IS a gov't takeover when they make all the rules and can skew them toward a single payer system, which Obama actually stated was the plan, to do it by degrees. In this case he was actually telling the truth, kind of a novel thing for him.

  21. Kick out the middle-man to handle student loans like a proper monopoly should! Once again Congress finds a solution where no problem existed in a way that gives them unconstitutional control over education.
    I am less concerned about students being unable to obtain loans. That will be easy. I am more concerned about situations at colleges that the federal government may deem too critical to ignore. Students can get whatever money they need, but can't USE it at college X because they aren't diverse, are racist, or just not evolved enough. But hopefully nothing of the sort will ever happen and that's just my crazy-train talkin'
    What will definitely happen is the continued lack of any real free-market competition and absence of any vestige of risk. Cory is correct in characterizing the private lenders this way. What he doesn't get is that having the government grab all the loan control doesn't fix it. It makes it worse. Now the loans will be given by an entity with full guarantee of payment (still by the taxpayer, not a change) but now the people involved, instead of very low risk, will have ZERO concern for the risk involved....

    ...isn't that exactly what Fannie-Mae did? Oh this is going to end well

  22. Cory: "I'll embrace all those words to describe my values. "

    heh, how about tyranny then? Liberty only exists for the individual. Community effort is a voluntary ideal, but Communitarian-ism is not about voluntary efforts, it is about governing for the common good, using the power of government. Using economic or criminal penalties for people who don't want to, say, buy insurance, fund ACORN, bail out General Motors, or even drive a *gasp* SUV. Your ideals are justified in the same way Chavez, Zelaya or Castro justified their actions. You seek to create a better world, whether we want it of not.

  23. Cory: "the government has saved $61 billion dollars. They are using the majority of those savings..."

    Is it really saving if they turn around and allocate it for spending before it is even enacted? I have doubts the reduced costs will even be realized: higher tuition equals bigger loans and this bill doesn't address the skyrocketing tuition at all. Will the results change anything? No, because they have already spent the money

  24. nonnie: "govt kicks out the private lenders, borrows money at 2% interest, loans it out at 6.4% ..."

    I think you are wrong about this. If Moody downgrades our credit rating the government won't be getting those 2% rates. The question is if they will hike up the rate for students or take the hit in their "savings" column.


Comments are closed, as this portion of the Madville Times is in archive mode. You can join the discussion of current issues at MadvilleTimes.com.

Note: Only a member of this blog may post a comment.