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GOP Warns of a ‘Government Takeover’ of Student Lending

Don’t say they’re not on message. A group of Republicans this afternoon will meet with reporters to protest the Democrats’ plans to eliminate tens of

Ismaeel Delgado
Last updated: Jul 31, 2020 | Mar 16, 2010

Don’t say they’re not on message.

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’ 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.

Ismaeel Delgado | Ismaeel Delgado has been working for the Ministry of Information and Communications as a Technical Officer for the past five years. He is an Electronics and Communication Engineer with a Masters in Information and Communication Engineering. He is involved in the review, revision, redesign, and expansion of the required structure, legislation, laws, and technically relevant national planning and program for spectrum management based on ITU radio regulations as a technical officer in the Ministry of Information and Communications' Frequency Management Department.


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