Sunday, September 13, 2009
This article in the 9/12/2009 Wall Street Journal discusses the Obama plan that calls for the U.S. Dept. of Educ. (DOE) to increase its current 20% share of student-loan origination market to 80% on July 1, 2010. The remaining 20% in the private sector will simply fade away.
For decades, federally backed student loans were the most common way to borrow for college. Money was raised in the private sector, loans made and the private institutions paid a fee to the government for each loan. In return, the government covered most of the defaults which in turn, allowed the private lenders to make a regulated return.
All that changed in 2007 after Democrats won control of Congress. They legislated a return so low that no private lender could make a profit holding these assets. To keep the tap open, the feds began buying loans from private originators in 2008. This was to be a temporary move that was to expire in 2010. Guess what... now the Democrats want the DOE to be the exclusive banker to college students.
Concerns about the government's poor customer service had resulted in borrowers choosing private lenders. Education institutions now are concerned that the feds will not be able to pull off their desired takeover in eight months (hm, wonder why).
So what, say Dems who have already greased this fall's budget reconciliation to pass all of this on a mere majority vote. In addition, they are helped by rigged government accounting that disguises the cost of making these below-market loans to unemployed 18-year-olds. Democrats claimed savings of $87,000,000,000 but in reality, the real savings are about half that amount, $46,000,000,000. If a private sector lender tried to pull this stunt, it would be criminal fraud.
Defaults are expected to increase across the board.
The second area where the Dems want more control includes the Pell grants. Detail on this Pell Grant takeover is at the CD 2 Republican website, where the efforts of Congressman Kline who caught the 25% low-ball estimate are described.
Government take over of: automotive industry? health industry? education industry? what next?