Obama's Student Loan Grab Will Cost Jobs, Eliminate Competition And Grow Government

If a private company looked to corner the market on student loans, they'd be hauled before Congress. But the liberals in this Congress are looking to do that just that, a move that will cost private sector jobs, eliminate competition, allow government to profit from individuals needing to borrow money for education, and potentially prove financially disastrous for taxpayers in the end.

Net net, need money to go to school. Good, sign here, we are all socialists, now.

Regardless, should Harkin and Obama succeed, all private lenders would be excluded from making government-guaranteed student loans.  There will be no government-guaranteed loan option for students other than federal loans (and, as the Journal notes, “The remaining 20% of the market that is now completely private will likely shrink further as lenders try to comply with regulations Congress created last year.”)

Democrats claim the bill would save millions, but they fail to mention it will cost jobs — tens of thousands of private sector jobs — (as if we could stand to lose jobs right now).  Aside from that, the bill would obviously transfer even more control from the private sector to the government.

The history of student loans reveals a troubled past in which losses were hidden and liberals have been trying to take over the sector for decades, just as they are trying to do with health care today.

There's push back coming from several states who've realized the move will cost them jobs. Here's a website detailing the issue for Indiana and FL, PA, VA, DE, and NY are said to have similar efforts underway, as well.

Several colleges and universities have already written letters of protest to Congress due to the damage to current student loan options the planned government takeover will cause. Here are pdf copies of two letters to Education Secretary Arne Duncan, one from Senator Johanns of Nebraska to Duncan on 11-03-09 and one from Senator Alexander of Tennesee to Duncan, as well outlining the issues involved.

That move gathered steam when it was learned that, despite no changes currently in effect, Duncan has already contacted schools and universities in hopes of encouraging them to get on board. Text below. Unfortunately, it appears if we don't keep a close eye on this administration and Congress, there might not be much of a private sector left by the time we get to 2012.

Ultimately, something like this could lead to government, not you, or anyone else deciding whether or not your children, or grandchildren are able to attend college or university. One can only imagine the choices government might be empowered to make were that to eventuate down the road. Given government's continuing trend to always over reach, there's every reason to fear such a system coming to pass one day. A government controlled system is not what freedom and open access to education are all about. Not today they aren't, anyway. Stay alert and get involved where you can.

Letter from the U.S. Department of Education regarding student loan programs

THE SECRETARY OF EDUCATION

WASHINGTON, DC  20202

October 26, 2009

As this academic year moves forward, it is hard to believe we already need to consider the 2010-2011 year to come.  In doing so, I am writing to seek your assistance and offer mine in taking the necessary steps to ensure uninterrupted access to federal student loans by ensuring your institution is Direct Loan-ready for the 2010-2011 academic year.

Eighteen months ago, uncertainty in the financial markets seriously threatened the availability of Federal Family Education Loan (FFEL) Program loans for the upcoming 2008-09 academic year.  Congress acted quickly to provide the Department of Education with unprecedented temporary authority to directly finance loans made through FFEL Program lenders.  The goal was to ensure that every student or parent with a need for a federal loan would be able to get one, whether or not the student’s educational institution had taken the steps to provide loans through the Direct Loan Program (where loan access was not affected).  This stopgap measure, the Ensuring Continued Access to Student Loans Act (ECASLA), was helpful in assisting FFEL Program lenders in making $61.3 billion in new loans to students and their parents this past year.  And the bulk of those funds—some $46.3 billion—was provided by the Department of Education.

While many institutions like yours continued to use the FFEL Program loan delivery process last year, more than 500 others responded to the uncertainty by switching to the Direct Loan Program.  These colleges’ move to direct lending happened in an efficient and effective manner, without any interruption of service to students, and the number of Direct Loans increased by nearly two-thirds compared to the previous year.  As you know, the Direct Loan Program provides students with the same types of loans, with essentially the same terms, as those made in the FFEL Program.

I do not anticipate any major loan access problems during the remainder of this academic year because Congress’s temporary measure remains in effect.  However, while there are encouraging signs that the financial markets are rebounding, the most prudent course of action is for you to ensure that your institution is Direct Loan-ready for the 2010-2011 academic year.  That way, loan access for your students will be assured.  As you may know, President Obama has proposed that Congress make the loan system more reliable by moving to a 100 percent Direct Loan delivery system.  In any event, under current law, ECASLA will expire, and the continued participation of FFEL Program lenders will be in question.

The Department of Education stands ready to assist with any questions you and your staff may have about becoming Direct Loan-ready.  Many institutions have already taken the initial step of contacting us to ensure the appropriate transition steps have been taken at Federal Student Aid to begin the process.  If your school has not taken this initial step, we recommend that you do so.  Please also reach out to your technology, financial aid, and business offices to make sure they are working together to ensure federal loan access for your students and their parents.  If they are unsure of the steps to take, please have them contact our school relations center at 1-800-848-0978, or e-mail us at DLEnrollment_FSA@ed.gov with questions.

Thank you for your attention to this important matter.

Arne Duncan

Comments

[Good Lt.]

President FAILbama continues his laughable blindness when it comes to economics.

He has NO CLUE what the hell he is doing. And in the unlikely event that he DOES realize what he is doing and doesn't care, then he needs to be impeached and removed from office for the good of the nation.

[rope tree congressperson]

It's about time that more people started taking notice of this. This has been screwing recent graduates over for several months now. First, the letters in the mail about how the government is seizing our loans with some nonsense spiel making sure everyone has access to education... then about once every other month we get a new letter in the mail about new "regulations" and how they change our loan terms.

You see, the administration seems to think that since they've seized my loans from my original lender, that they're somehow entitled to alter the terms of my promisory note however they damn well please through bureaucratic fiat. So much for rule of law.

What hurts the most is the removal of the flexible deferment options that my original lender promised. A staggering number of graduates cannot find anything beyond menial work, yet they can't meet the ridiculous new deferment requirements to put their crushing loan payments on hold while they search for a job and try to keep a roof over their head. The new deferment requirements seem to be quite obviously designed to funnel people into full-time minimum wage work, probably to help fudge unemployment stats. Worse yet, they give you a moving target by constantly changing the rules - I've managed to get my ducks in a row several times now, only to have some BS new rule cooked up and applied retroactively to my accounts.

At this point, I could honestly care less about the future of higher education; so few degrees are really worth anything anymore, and it just isn't worth going into debt. The immediate problem here is the impoverishment of a substantial fraction of recent graduates. The damage is already done.

[Menito Bussolini]

Everything within the state, nothing outside the state!

[Nick Reynolds]

NO NATIONALIZATION OF ANYTHING!!! That is all!

[Paul]

It's an interesting action but I was expecting moves like this to be made sooner or later.

Student loans actually serve to restrict access to education by raising the amount of money flowing into the educational sector. The inflation experienced by that sector is then proportional to the number of students entering.

I looked into attending a private 4 year institution once. They said that 95% of their students got financial aid. That's insane! As it is, 66 percent of all students getting a bachelor's degree get financial aid to do it.

Like housing prices, the price of a degree is driven up by the available monies in the market. This would curtail the monies available, and thus drive down the cost of education. The problem is that some universities may find it difficult to survive this as they spent the boom years building hugely expensive to maintain and pay for facilities.

[Steve]

"You see, the administration seems to think that since they've seized my loans from my original lender, that they're somehow entitled to alter the terms of my promisory note however they damn well please through bureaucratic fiat. So much for rule of law."

Why would they treat you with any more respect than they treated lending institutions or a Chrysler bondholders? They've felt perfectly free to alter the terms of their deals, or not follow bankruptcy law.

Just keep in mind, this provides the roadmap for what will happen under "Health Care Reform," especially if there is a public option or even if they succeed in just getting exchanges (which are functionally the same).

When the government gets involved, it will take the industry over. Just as it's done here. And when they get involved, you are state owned.