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House Republicans Confused on Student Loan Debate
How many employees does it take to run a government program? Conservative ideology teaches that the correct answer is, "as few as possible." Can the federal government create jobs? Conservative ideology teaches that the correct answer is, "No, because the federal government must first tax someone, thereby destroying jobs, to generate the revenue that will pay the salaries of government employees." Great conservative politicians and legislators of the past, such as Barry Goldwater (pictured at far right), had these basic tenets running through their veins. Yet these principles appear to be all but lost on today's Republican party when it comes to the issue of federal student loan policy.
Republicans on Capitol Hill are grasping for good public policy arguments to fight legislation now under consideration in the House of Representatives that would eliminate the Federal Family Education Loan program (FFEL), which subsidizes private lenders to make government-backed loans, and replace it with an expansion of the Direct Loan program. But a recent memo on the student loan reform bill from the House Republican Conference (a sort of GOP messaging machine) reveals a party deeply confused about its core principles -- and about how the federal student loan program works. The memo tells House Republicans to oppose a move to 100 percent direct lending because it "kills jobs and greatly expands the federal government's control of the education loan market." Come again?
The two federal student loan delivery systems (FFEL and Direct Loans) are part of the same government program that by law must provide loans with virtually identical terms to student borrowers. A move to 100 percent direct lending would certainly mean that fewer workers would be needed to run the program, even though all eligible students would continue to receive the same government loans they did before the change. In other words, fewer resources would be devoted to administering the same benefits provided by a government program.
One would think that Congressional Republicans would champion this lower-cost, smaller-government approach. But this is not your father's (or your grandfather's) Republican Party. It appears that House Republicans believe that the more resources and jobs devoted to FFEL the better. Their rationale is that these resources and jobs are part of the "private sector" because they are employed by private entities, like Nelnet or Sallie Mae. Thus, a move to 100 percent direct lending makes the federal government bigger and destroys "private sector" jobs associated with administering FFEL.
Deference to the private market versus government activity is a worthy conservative principle. But Republican arguments in favor of FFEL turn this tenet into an embarrassing sham. When private entities are paid under no-bid formulas to run a government entitlement program as they are in the FFEL program, it's quite a stretch to claim the jobs entailed are "private sector" jobs. But the sham doesn't end there.
In their support for the FFEL program, it appears that House Republicans want big government too -- they just want to dress it up as private enterprise. Under FFEL, the federal government sets the terms of the loans while taxpayers insure private lenders against 100 percent of the interest rate risk, subsidize administrative costs, and cover all but a sliver of default losses on loans. How exactly does that arrangement make for smaller government than if the same loan were made directly from the Treasury?
Conservatives watching the House debate student loan reform this week should be saddened to watch the Republican party make a mockery of their small-government ethos and support for private enterprise. The Republicans could certainly use a leader like Barry Goldwater to remind them what they stand for.
The author is a former Republican Congressional Staffer.
A Picture Is Worth A Thousand Words
The Republican Party lost its way when voters allowed the neocons to take over. The politician on the left in this photo, who isn't fit to scrape the mud off of Barry Goldwater's boots, reminds us how far from its core values the Republican Party has fallen.
just give in already
It really has become embarrassing to be enrolled in the Republican party. Run by buffoons, there is no strategic plan for legislation, public policy, or even electoral positioning. Total reactive mode. On health care it is obvious the plan is to use pieces of the plan to crucify certain Dems in the '10 or '12 elections, but that is hardly a strategic play. To do the same with a pending student finance debacle (surely 100% FDLP will be a bumpy ride at best, even catastrophic over time) will take 8-12 years before the fallout actually reaches the voting public. Republicans are likely 16 to 20 years away from being a relevant party again, once the Bible thumpers have finally died off and been replaced by Collins/Snowe-style moderates. What damage will Pelosi/Reid do in the next 20 years? Egads!
We Need Reform, Not Nationalization
The problem with this bill is that it would leave the government to decide WHO gets aid. There are tons of students out there who turn to private loans because they don't get enough money from the government. If private lenders are eliminated, then students are at the mercy of Uncle Sam.
Rather than address the ridiculous price of tuition or the high terms set by private lenders, the Democrats are again seeking to nationalize everything and 'solve all the problems' with taxpayer dollars.
The argument should not be about creating or losing jobs, it should be about HELPING STUDENTS GET THROUGH SCHOOL without putting taxpayers on the hook for it.
Annon - You Miss The Point!!
You can't nationalize a gov't program if it is already a gov't program! This is not going to eliminate private loan options (with private lenders)...it's going to eliminate private lenders making federal loans. If a student wants to (or needs to) borrow a private student loan...s/he will still be able to (so long as they have good credit and don't mind riding the rollercoster of fluctuating interest rates and are fine with very limited repayment options). This new program just cuts out the middle man (lenders) for federal loans.
Loan Programs
FFELP and Direct are governed by the same regulations, so the loan amounts and other eligibility criteria are exactly the same. The difference is that private lenders are removed from the equation.
Ostensibly, anyway, since the servicing contracts were given to existing private loan servicers which have to be paid. I'm not convinced that it will save money in the long run, and I think that's the point the Republicats are trying to make. Or is it the Demlicans? I get confused. Two puppets controlled by the same dark forces, in my estimation, but no one cares what I think.
FAFSA and FFELP
I believe if anyone, or entity, that would misuse the student loan money is the private sector. I am all for the government cutting out the middle man and holding and controlling the student loans. The interest that is accrued during the span of the loan is money that the government could use to promote the strength of our beautiful country of the United States of America.
When I realized that my FAFSA loan was controlled by a private sector I was appalled at the idea. Why is the government not in control of the revenue from the interest? It is money that could be utilized for our country, and should not be in the greedy hands of private sectors who are always looking for free-handouts (or should I say--bail-outs?)If this is ever put to a public vote, my vote would be for the government controlling the FAFSA loans in its entirety.
Schmoans
The goal of the Republican Party is that in every transaction, there should always be profit. Hence, the Party is willing to spend MORE taxpayer dollars to do the same thing that could be done without private profit. They're not confused. They're taking money from taxpayers to enrich the wealthy. They pretend to support a smaller government when, in fact, they simply want to make sure that private interests profit from all government activities. Hence, for example, no draft, an army that can't recruit enough soldiers, and the profusion of companies willing to provide pizza for the troops on cost-plus contracts.
Students who don't get federal loans (whoever they might be) can, of course, still get loans from private sources.
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