Student Loans Bill

31Mar10

Via NRO, Senator Lamar Alexander (R-Ten) goes after the attachment to the health care bill:

“Up to now, 15 out of 19 million student loans were private loans, backed by the government,” Alexander says. “Now we’re going to borrow half-a-trillion from China to pay for billions in new loans. Not only will this add to the debt, but in the middle of a recession, this will throw 31,000 Americans working at community banks and non-profit lenders out of work.”

Alexander, a former University of Tennessee president, says the effects of Obama’s policy could be felt for decades. “When I was education secretary, one of my major objections to turning it all over to the government was that I didn’t think the government could manage it,” he says. “This is going to be too big and too congested, and makes getting your student loan about as attractive as lining up to get your driver’s license in some states.”

First, it took me no more than an hour to get my driver’s license after passing my test, so yes, this all looks very attractive to me. I don’t know if this is a misunderstanding of the policy or just dishonesty, but Alexander has this wrong. As it stands now, the Federal Government actually provides billions of dollars of subsidies to these private lenders in order to make credit accessible to more students. In other words, these private banks (remember the conservative hand-wringing over the Fannie Mae private/public partnership?) are receiving federal assistance. Which is also known as welfare; granted this is lost on most Republicans, because to them, welfare is something they use to race-bait in elections.

So instead of subsidizing those private lenders–which, remember, are for-profit companies, making them just as susceptible to use the money on bonuses as the big banks–will provide the capital directly from the government to the students. You’re tax payer dollars will not be contributing to the bonuses for CEOs of failing companies.

This move is hardly groundbreaking, as the government already provides loans to students, most notably in the form of Stafford Loans. In a thematic parallel, the conservative charge on health care was that the government was “taking over” the health care system. Quite the exaggeration, as health care reform merely increased Medicaid access for those could not afford private insurance, and implemented much-needed regulations on private insurers. The student loan reform bill is arguably more liberal than health care reform, but the idea that it’s a government take over is simply untrue. Private lending has not been banned, and because of the perennially increasing cost of tuition, private loans will still be necessary for many.

Furthermore, the program is actually deficit-neutral while increasing access to student loans. From the NYT:

the government will expand a direct lending program, a step that the Congressional Budget Office said would save taxpayers $61 billion over 10 years, and use the money to increase Pell grants for students.

The student loan bill is a centerpiece of President Obama’s education agenda, and it was included in the budget reconciliation measure that also made final revisions to the Senate-passed health care bill.

The bill sets automatic annual increases in the maximum Pell grant, scheduled to rise to $5,975 by 2017 from $5,350 this year. The new Pell initiative also includes $13.5 billion to cover a shortfall caused by a steep rise in the number of Americans enrolling in college and seeking financial aid during the recession.

So one must consider fully what the Republicans, like Alexander, did here by voting against the bill. One might ponder a few ofthe following points

  • They supported corporate welfare by defending subsidies
  • They favored more government spending
  • They endorsed the already far too cozy relationship between lenders and government
  • They supported a continuous bailout of private companies with tax payer dollars
  • They actually want less people to have access to credit for education at a time when many are returning to school because they lost their job, thus contributing to unemployment
  • They just have a vague distrust of government
  • They are obstructing, hoping the country goes further to shit so they can pick up more seats this year in a wave anti-incumbency, so they can obstruct further until Democrats just give up the presidency to Sarah Palin 2012

So what we’re left with, even assuming good faith on the GOP’s part is a triumph of conservative ideology over conservative pragmatism. Pessimistically, well, see above.

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