U.S. Department of Education

Last week, the National Center for Education Statistics (NCES) released "Projections of Education Statistics to 2018," a report predicting enrollment and expenditure increases in education over the coming decade. These projections can provide important information to states and school districts as they seek to invest new funds available through the American Recovery and Reinvestment Act.

A recently released study by the Government Accountability Office (GAO) suggests that states have been spending increasingly more money - over $640 million in 2007-08 - on creating and implementing academic assessment tests associated with the No Child Left Behind Act (NCLB). While some federal funds have gone to support these efforts, states have provided most of the funds in the past.

Pity the student loan industry. Even with the Federal Family Education Loan (FFEL) program on the verge of extinction, the industry's plight has not generated grass-roots opposition from anyone other than those who have a vested interest in the program's survival (yes, that includes financial aid administrators who serve on lender and guaranty agency advisory boards and/or belong to state associations that depend heavily on student loan providers for leadership and financial support).

There have not been any angry town hall meetings with citizens raging about a government takeover of this federal program. Students and their parents are not rushing the barricades to demand that lenders be allowed to continue collecting generous subsidies for making virtually risk-free loans.

The indifference of students and their families to President Obama's proposal to kill FFEL shouldn't come as a surprise -- as the terms and conditions of federal student loans are pretty much identical whether they come from the loan industry or from the U.S. Department of Education's Direct Lending program. And despite the loan industry's best efforts, students are not up in arms about losing their ability to choose their own lenders -- because they've never really had much of a choice at all and most really couldn't care less about where their federal loans come from, as long as they get the money on time to pay their college bills. Furthermore, students have never been able to choose between Direct Loans and FFEL, despite the collective misunderstandings of some Senate Republicans, the Heritage Foundation, and The Wall Street Journal. Only colleges and universities can choose which program their respective students borrow under, and it's extremely unlikely that any student has chosen a college based on its participation in either Direct Lending or FFEL.

In early September the Department of Education (ED) released additional guidance that provides details on how states and school districts can use Individuals with Disabilities Education Act (IDEA) stimulus funds for reform activities. This guidance seeks to ease some of the inherent tension in the American Recovery and Reinvestment Act (ARRA) goals of saving jobs and promoting education reform - a tension that likely has slowed the speed with which states and districts have been able to spend funds. However, one piece of the outlined reform efforts can bridge the gap between these two seemingly opposite goals. Specifically, the guidance provides methods for using ARRA IDEA funds to improve teacher effectiveness and distribution that also have important implications for the teacher workforce.

Legislation that the U.S. House of Representatives approved last week would make landmark changes to the federal student loan programs -- changes that we have advocated at Higher Ed Watch for the last three years.

We can not overstate the significance of this achievement. Despite fierce opposition from the deep-pocketed student loan industry and their allies on Capitol Hill, the House moved forward with a bill that would eliminate unnecessary middlemen from the process of originating and guaranteeing federal student loans, and would have the government make all federal student loans directly. If this change is enacted into law, it will overwhelmingly simplify the federal student loan program and redirect a massive amount of federal funds out of the pockets of lenders and into the hands of the students who need the help the most.

Having said that, the House bill is far from perfect. The measure contains one provision that we believe is extremely misguided and will, if enacted, harm the cause of student loan reform, and another that would gut a key consumer protection provision in federal law that aims to safeguard students from unscrupulous trade schools. It also has other provisions that are well-intentioned but, as written, are unlikely to achieve the lofty goals the bill's authors have set for them.

Attention will soon shift to the Senate, where the leaders of the Health, Education, Labor and Pensions (HELP) Committee are expected to release their own version of the student loan reform legislation shortly. While the Senate committee will likely stick to the same broad outlines as the House, it could make a few key changes that would significantly strengthen the measure.

The Federal Education Budget Project (FEBP), Ed Money Watch's parent initiative, provides a wealth of state and school district level data on federal funding, demographics, and achievement through its website www.edbudgetproject.org. These data can tell important stories about how federal education funding interacts with student demographics and achievement. Moreover, the data often reveal rarely-discussed idiosyncrasies in federal funding and education.

Last week we examined the rate at which stimulus funds for different programs have been disbursed by states for spending. Despite encouragement from the Department of Education to spend funds quickly, the majority of education stimulus funds have not yet left the bank. However, this is not the case in all states.

With the U.S. House of Representatives poised to take up legislation that would eliminate the Federal Family Education Loan (FFEL) program and provide all federal student loans directly from the government, lawmakers opposed to the plan are coming armed with talking points straight from the student loan industry. Unfortunately for these legislators, many of the lenders' arguments against the Direct Loan program just don't stand up to scrutiny.

At Higher Ed Watch, we have expended a lot of ink (or at least a lot of blog space) over the last six months analyzing and critiquing the loan industry's arguments. In preparation for House floor action on the legislation, we thought it would be a good time to revisit some of the lenders' most dubious claims and to run excerpts from previous posts that responded to them.

Here are some of the arguments you're likely to hear and our take on them:

Argument: By proposing to provide federal student loans entirely through the Direct Lending (DL) program, the Obama administration and Democratic Congressional leaders are trying to "nationalize" or impose a "government takeover" of the federal student loan program.

Our Response: "We have news for the lenders: it is impossible to nationalize a government program. By definition, the FFEL program is already a nationalized program because it is a government program, just like direct lending...Sorry, lenders; it's a little late to complain about nationalization. Lyndon Johnson settled that fight a long time ago." (Can You Nationalize a Government Program?)

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?

Since the release of the Race to the Top grant priorities in late July, states across the country have been scrambling to ensure their eligibility for their share of the $4.35 billion in federal funds to encourage innovation in education reform. Several states, including California, Nevada, Wisconsin, New York, Alaska, Missouri, and Texas, were immediately identified as ineligible for the program due to student data "fire walls" or unwillingness to participate in the common standards process. But California's Governor, Arnold Schwarzenegger, is unwilling to let as much as $500 million slip through his fingers. On August 20^th he called a special session of the legislature to consider a bill that would immediately enact sweeping changes to the state's education system and remove any barriers to the Race to the Top funds. Below, we discuss details of the proposed California bill.