Student Loan Reform
Somewhat overshadowed by all the attention on the health care reform bill was the student loan overhaul that was added into the reconciliation package:
Ending one of the fiercest lobbying fights in Washington, Congress voted Thursday to force commercial banks out of the federal student loan market, cutting off billions of dollars in profits in a sweeping restructuring of financial-aid programs and redirecting most of the money to new education initiatives.
It’s been lost in the bank bailout fight, but the U.S. government has been sending money to banks for years to give out student loans.
Since the bank-based loan program began in 1965, commercial banks like Sallie Mae and Nelnet have received guaranteed federal subsidies to lend money to students, with the government assuming nearly all the risk. Democrats have long denounced the program, saying it fattened the bottom line for banks at the expense of students and taxpayers.
The overhaul cuts out the middleman and makes the federal government the direct lender. This change will save us money and help more people who want to go to college.
The Congressional Budget Office said the direct-lending approach would save taxpayers about $61 billion over 10 years. Roughly $40 billion of the savings will be redirected to higher education. Education programs will get an additional $10 billion from the health care package.
The bill includes some landmark changes, like automatic increases, tied to inflation, in the maximum Pell grant award. But for individual students, the increase in the maximum Pell grant — to $5,900 in 2019-20 from $5,550 for the 2010-11 school year — is minuscule, compared with the steep, inexorable rise in tuition for public and private colleges alike.
One of the biggest student loan servicers, Sallie Mae, has a branch in Delaware. Mike Castle was against the student loan overhaul, citing Delaware jobs as one of his reasons.
Rep. Mike Castle, R-Del., who voted against both the House health care reform and student loan bills, said he will oppose the new legislation, describing the ending of subsidies as “government-controlled student lending” and saying “the change would also eliminate hundreds of jobs for Delawareans, and tens of thousands of jobs across the country, in the middle of a harsh economy.”
The next time you hear Mike Castle whining about “government spending,” “bank bailouts” or “wasted money” just remember that Castle supported giving government money to a private entity to pad their bottom line.
Both Ted Kaufman and Tom Carper voted for the student loan overhaul, despite Sallie Mae’s presence in the state.
Tags: Mike Castle, Sallie Mae, Student Loans
The solution to the student loan mess was to get the government out of the business of higher education. Instead, the always efficient government will now be the sole source of student funding.
Hundreds of jobs will be lost in Delaware’s private sector, jobs funded by private citizens choosing to borrow money for education. They will be replaced by jobs in the federal government funded by captive tax-payers. Even if there is a net gain of jobs in the public sector administration of Obama’s latest monster (likely), how likely is it that they will be in Delaware?
I absolutely agree that these private institutions should not be buoyed by the feds. Now we will have Freddie and Fannie style accounting for student loans, a guaranteed failure.
Where does Coons stand? We already have bashed Carney for supporting the elimination of jobs.
“We already have bashed Carney for supporting the elimination of jobs.”
And so your journey to the dark side of hypocrisy is complete. Those jobs represented a waste of money — tax money. You know, the money you always claim the government is wasting.
“The solution to the student loan mess was to get the government out of the business of higher education.”
Except that the money was coming from your taxes in the first place. There were no such loans without the government guaranteeing them. Geez, you folks are stupid.
Both Ted Kaufman and Tom Carper voted for the student loan overhaul, despite Sallie Mae’s presence in the state.
It is a good thing the student loan reform was in a must-pass bill. I don’t know if we’d get the same votes on a standalone bill.
Still, those were gutsy votes for Delaware. Congratulations, Senators Ted and Tom.
The Republican David Party motto: “Fighting a holy war against government waste and corruption — except when the Democrats agree.”
But that’s really the GOP Prime Directive (yes, I’m a geek) right now — Beat the Democrats. That’s their first and most important concern. Not helping the country. Not helping the American people. Not even sticking to their own beliefs. All they’re worried about is winning political points. I guess it’s not all that surpising, though, considering that they’re the party of big business. They play by the same rules — Win at all costs, the end justifies the means.
This is a good thing all the way around — taxpayers get back $61B to spend on education, not in bank profits. Students will get the Congress-set interest rate on these loans — without the additional points added by the banks. And as for all of those jobs supposed to be lost? Some may go away, but not as many as you think:
This is a very good reform. If the only way to get the private sector to take on government work is to pay them more than the government’s cost to do it, you are looking at a program that wastes taxpayer funds.
Geezer: “Except that the money was coming from your taxes in the first place. There were no such loans without the government guaranteeing them.”
There would be fewer loans, not zero. There should be fewer student loans. And housing loans and new car loans. People are smothering themselves with debt. Less people should be in college, a big house, or a new Caddy. These things should be earned, but now, as long as you can scribble something that looks like a name, you can sign your life away. It is largely due to the government coming in and bailing out every sucker (yes, including corporations) who can’t balance his books. Look at Freddie and Fannie, they bleed money and give big bonuses to their executives, ALL on the tax payer dime.
This new program will need the blank check that Congress has given to Fannie and Freddie before my kid is ready for college. And please save it, I already know you think my kid is too stupid for higher education.
Well that was just stupid, Jason Z.
If you can’t defend paying 61B to banks to do something the government can do cheaper, you really should just walk away. Because the rest of that screed was clueless. We’re delighted that you could pay cash for your house, but there aren’t many Americans in the same boat.
“Less people should be in college, a big house, or a new Caddy.”
The fact that you can’t distinguish a difference between buying a big house or car and getting a college education shows that any money YOU spent on higher education was a total waste.
As for your claim there would be fewer student loans but not zero, look it up. Without government guarantees, private sources would demand collateral for those loans, which would also carry higher interest rates than do government-backed loans, making higher education as restricted as it was before World War II.
I realize you people are royalist troglodytes, but rarely are you so helpful at proving it.
AS for your argument about how much you hate other government programs, I”ll ignore for the moment the fact that this program ALREADY operates, and not in the way you describe. For the sake of logic, I’ll just point out that if someone in your neighborhood is convicted of a crime, I don’t get to call everyone in your neighborhood a criminal.
There should be fewer student loans. And housing loans and new car loans. People are smothering themselves with debt. Less people should be in college,…
I was waiting for this. I’m not sure what your position is, Jason, but I think this is a popular conservative position. Note that since we’re talking about financial assistance, what he’s really saying is not that there should be fewer people in college, but that there should be fewer poor people in college. Although with the rampant populist anti-intellectualism going around, I’m sure many think that we are better oof as an under-educated country. Certainly the GOP would be better off.
And don’t compare a student loan to a car loan or a mortgage. A student loan produces a benefit for society — an educated person. Unless you don’t think that education is a benefit for society, in which case it makes sense to want private banks to offer student loans for as high a price as they can.
I have to agree with conservatives on one point: In general, when you subsidize something, the price goes up. This is nowhere more clear than with college tuition.
But rather than cut off college subsidies, I’d audit these colleges to an inch of their lives to find out why their prices are going up so much, and add disincentives and regulation where it makes sense to keep costs down.
You don’t need an audit. Several years ago (before its sale) the Inquirer did a series of articles about this. Virtually all of the increase, they found, was in administrators. Anon is correct — because the federal money flows in, colleges have loaded up on people who have little to do with education but lots to do with securing money.
Both Ted Kaufman and Tom Carper voted for the student loan overhaul, despite Sallie Mae’s presence in the state.
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Yes they did…but Carper and Kaufman had a very strong and almost successful opposition to this legislation. It is a bit disingenuous to slam Castle for supporting the DE jobs and ignore the lengths that the DEM Senators had gone to to protect the industry here, IMHO.
Their letter of objection to the Senate Education Committee chair was well-covered in the progressive blogosphere (Matt Yglesias, Jane Hamsher, Jon Walker) and in the Philly and Wilmington press ~(://www.philly.com/philly/blogs/inq-phillydeals/Senators_put_Del_jobs_before_US_student_loan_reform.html;
http://www.delawareonline.com/article/20100223/BUSINESS/2230324/Del.-senators-back-student-loan-providers)
Their letter to Harkins caused a rucus at first…and almost derailed the Obama adminstration’s obective.
But their complaint was largely based the industry’s spin which was easily debunked by The Nation’s De La Torre – “Are Student Loan Companies Playing Politics With People …” which points out that there are already provisions that will enhance the industry’s business and there will be a net gain in American jobs.
http://www.thenation.com/doc/20091221/de_la_torre
I certainly hope our Senators are rewarded by the industry for trying and that the DE jobs will stay here.
Kaufman backed off as soon as the legislation was placed in HCR (and after I called him out for it) but Carper objected right down to the wire and yesterday he even gave a mea culpa on WDEL to the industry he “failed”.
Geezer: “Except that the money was coming from your taxes in the first place. There were no such loans without the government guaranteeing them.”
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Same with home loans to a degree. The government guarantees backing the loans were what credit insurance swappers were ‘banking on’. Some services shouldn’t have profiteers as middlemen.
Apologies, “FEWER people should be in college, a big house, or a new Caddy.”
Those people are the ones who cannot afford those things. That includes wealthy and not-so-wealthy people. If I meant, “poor people,” I would have written it.
It’s so much fun debating the issues here:
“Well that was just stupid, Jason Z.”
“the rest of that screed was clueless”
“you people are royalist troglodytes”
You people? Please find the personal invectives I’ve thrown here. It is cowardly to spew filth from behind a pseudonym; I love the disagreements, but “you people” can’t seem to keep it in the arena of ideas.
THat’s because, Jason, you are about five intellectual levels behind us. It’s a waste of time to debate issues with you. This web site is not called “Let’s Waste Time Debating Issues with Conservatives.” It’s by liberals, for liberals. You wouldn’t appreciate a crew of liberals showing up for “debates” at your Tea Party meetings. Grab a clue and vamoose.
If you could ,actually have an idea, we’d be good to go.
But as already noted, you can’t even bother to deal with the topic at hand — just some clueless BS about making sure poor people don’t get loans or some such.
OK, Geezer wins the morning!
“Some services shouldn’t have profiteers as middlemen.”
Agreed, Nancy. But he was talking about BIG houses, not starter homes for low-income people, so I concentrated on the most egregious part of his statement.
Oh, BTW, where’s the “debate” if Jason can’t address my point: There’s a big difference between education and material goods.
Given that the HCR bill is a windfall for the health insurance industry, Carper and Kaufman were forced to choose between subsidizing the insurance industry or the banking industry.
This is an almost inhumanly cruel thing to do to a Delaware Senator. It is like asking a parent to choose between two of their children. I am surprised Carper’s head did not explode.
Insurance won though.
Everybody should get the chance to go to college. Smart kids are born to all families. It’s the only ticket to upward mobility anymore, hard work is no longer enough. You should ask my friend that had to drop out of college beacuse she couldn’t afford it, who is brilliant and well organized (was an office manager for an art gallery in NYC while she was in school), and has to work as a waitress in Dover because no office will hire her without a degree. Fewer people should go to college? that’s NUTS.
Educational debt is COMPLETELY different than other debt. It’s really the only debt economists all agree it’s ok to get into.
I doubt that Carper or perhaps even Kaufman would have voted yes on reforming the student loan program as a stand-alone bill. Nelson had killed this before but I think it was a brilliant move by the Obama administration to fold it into the reconciliation package.
Hey, maybe we can attach the HCR public option to the next banking bailout… 🙂
Carper would begin spinning until he dug himself into the center of the Earth.
Yes anon!
I saw someone on dkos yesterday proposing to put the public option with the Medicare “doc fix.” They might need to pass the doc fix through reconciliation and the public option would help pay for it.