GOP Warns of a ‘Government Takeover’ of Student Lending
Don’t say they’re not on message.
From the Washington Independent

A group of Republicans this afternoon will meet with reporters to
protest the Democrats’ plans to eliminate tens of billions of dollars in
government subsidies to private companies that lend to students. The
Democrats’ bill would have students borrow directly from the U.S.
Treasury, which makes sense to supporters because it’s the Treasury that
currently assumes all the risk for those loans anyway — a boon to
private companies that assume no risk.

The Congressional Budget Office estimates that eliminating the private
middleman will save $67 billion over the next decade, most of which will
go toward expanding college scholarships to low-income students.

No matter. “Such a move,” the Republicans’ news release claims, “is an
abuse of the legislative process that will eliminate borrower choice and
competition, destroy tens of thousands of jobs, and add to the country’s
long-term debt.”

The group includes Sen. Lamar Alexander (Tenn.), chairman of the Senate
Republican Conference; Rep. John Kline (Minn.), the senior Republican on
the House Education and Labor Committee; and Rep. Brett Guthrie (Ky.),
the top Republican on the higher education subpanel.

It’s worth noting that not all conservatives agree. In fact, President
George W. Bush proposed similar reforms as part of his annual budget
proposal during three years of his tenure. More recently, The Weekly
Standard blasted the current system of guaranteed loans as “a textbook
example of crony capitalism or (if you prefer) corporate socialism.”

The government assumes all the risk while doling out contracts to
favored businesses, who then reap the profits. With student loans, the
lender gets preening rights in the bargain, marketing itself as a
Merchant of Dreams, a benefactor of America’s youth, a sweet-tempered
Mr. Jaggers to a nation of eager Pips.

In truth, the only people who like the system of guaranteed loans
are the student loan industry — now handling more than $90 billion a
year — and the congressmen whose districts contain large numbers of
people who work in the student loan industry.

Earlier this month, Rep. Thomas Petri (Wis.), a senior Republican on the
Education and Labor Committee, also condemned the current lending
framework as a boondoggle enriching private lenders at the expense of
taxpayers and students.

“Private loans are much more expensive for borrowers — and much more
profitable for lenders,” Petri wrote in Roll Call. “We’ve seen how this
plays out — and it isn’t in the form of true choice or competition for
students.”

Perhaps GOP leaders knew where Petri stood when they skipped over the
16-term Wisconsin Republican to install Kline — a more conservative
four-termer — atop the GOP team on the Education and Labor panel.

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