It's about time
POSTED AT
09:28 PM ON Sep. 20, 2009
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Alysha Balog |
IDS
WE SAY The Student Aid and Fiscal Responsibility Act is long overdue.
The House of Representatives passed legislation last Thursday that would take private lenders out of the student loan industry altogether and save U.S. taxpayers close to $90 billion during 10 years, money which would then be used to increase Pell grant allocations and pay for community college reforms.
The bill now moves to the Senate, where its legislative success is less certain than it was in the House.
Currently when a student takes out a loan from the federal government, they have to go not to the federal government (that would make sense!), but to private lending institutions.
These institutions are given the money to lend to the student plus substantial subsidies to encourage them to participate in the program and a federal guarantee on the loan – which makes providing these risk free-loans an absolute jackpot for banks and other lending institutions that do nothing to deserve it.
What this bill proposes, however, is to take the banks out of the equation altogether.
Instead of having the federal government give money to lending institutions plus extra money on top of that for these banks to then lend to students, this legislation proposes the revolutionary idea of having the government provide the loans directly, cutting out the unnecessary middleman and all of the extra payouts that go along with it.
One would think that the bill’s safe passage through Congress would be a no-brainer given the enormous inefficiencies inherent in the current student loan system, but unfortunately it seems the health care debate that has infused Congress recently is seeping into and poisoning the rhetoric surrounding this completely unrelated bill.
Cries of “government takeover” have crept in from the health care debacle, but these should be ignored.
After all, the government already owns most of the debt that would be taken out of the hands of these banks – many of whom have received bailouts – so calling this a government takeover is quite disingenuous.
This bill decreases government bureaucracy, increases efficiency, wastes fewer taxpayer dollars and stops payouts to financial institutions for doing absolutely nothing but shifting their losses onto taxpayers.
What’s not to love?