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March 8, 2010
Obama's student loan monopoly
Hey kids! While you and your leftist profs were busy marching, stopping traffic, breaking windows and getting arrested last Thursday to protest tuition increases and classroom cutbacks, Senator Lamar Alexander (R-TN) was working on an op-ed for The Washington Post. As the protestors were trying to draw attention to their desire for more government funding, Senator Alexander was illustrating the added expense of increased government involvement in higher education.
[...] Starting in July, all 19 million students who want government-backed loans will line up at offices designated by the U.S. Education Department. Gone will be the days when students and their colleges picked the lender that best fit their needs; instead, a federal bureaucrat will make that choice for every student in America based on still-unclear guidelines. They say that this will save taxpayers up to $87 billion in subsidies that now go to "greedy" banks. In gleeful anticipation, members of Congress have lined up to spend those billions on Pell Grants and almost a dozen other programs. Banks are punished. Students are helped. Members of Congress look good.Alexander also points out that when given a choice, students overwhelmingly choose private lenders over government ones.
Here is what they haven't told us: The Education Department will borrow money at 2.8 percent from the Treasury, lend it to you at 6.8 percent and spend the difference on new programs. So you'll work longer to pay off your student loan to help pay for someone else's education-and to help your U.S. representative's reelection.
And there are some other things the government should tell you: The estimated $87 billion in savings isn't real. According to a July 2009 letter from the Congressional Budget Office (CBO) to Sen. Judd Gregg (R-N.H.), the savings are closer to $47 billion including administrative costs, if we use the same "scoring" (I.e. cost analysis) method that Congress required the CBO to use when it scored the Troubled Asset Relief Program last year because the method would more accurately calculate the cost to taxpayers.
By eliminating competition and forcing students to borrow from the government Obama is creating another powerful bureaucracy, which means more government (union) jobs. The expansion of the public sector and the growth of their unions helps the Democrat party to expand its base and maintain control over yet another sector of the economy. How long will it be before the loan approval process is politicized and the government will have the power to determine which students will be allowed to pursue a college education? We can be fairly certain that the future former president and his comrades have given this matter a lot of thought.