A Hearty thanks to Uncle Sam

Congressman McKeon must be upset today. The former leader of the House’s Education and Labor Committee used to have direct input and a lot of influence in how the federal government provided loans to students, both directly through Department of Education loans, and indirectly by how it regulated private sector lenders.

Well, that whole arrangement appears to be coming to an end. Congressman McKeon just sent me this:

“With passage of the Student Loan and Fiscal Responsibility Act today, the Majority moved to eliminate the Federal Family Education Loan Program, a program that has been in place since the 1960’s and has successfully allowed millions of students to further their education.

In contrast to 40 years of success under FFEL, the federally-run Direct Loan program has only been around since 1992. It was supposed to ‘compete’ with the private option. Included in the program was a subsidy to schools that participated in the new program; an incentive.  It didn’t work. The highest percentage of the student loan market that Direct Loans ever commanded was 34%.

Despite the limitations of the federally-run Direct Loans, the Majority voted to shut the more successful FFEL program down and consolidate the entire federal student loan program into the Direct Loan program.

For some reason, Democrats believe that with all of the different types of lenders out there – from mortgage lenders, to small business lenders, to consumer lenders – it is student lenders that are ripe for a federal monopoly.

So to those who claim the FFEL program does not work, I would only ask you to look back on the last 40 plus years before the credit crisis that crippled our entire financial system. The private sector is and has been a stable source of capital – it’s one that has served millions of students and families for decades. Instead of trying to keep private capital and innovation out of student lending permanently, perhaps we should be looking for ways to bring it back.

“With passage of the Student Loan and Fiscal Responsibility Act today, the Majority moved to eliminate the Federal Family Education Loan Program, a program that has been in place since the 1960’s and has successfully allowed millions of students to further their education.

In contrast to 40 years of success under FFEL, the federally-run Direct Loan program has only been around since 1992. It was supposed to ‘compete’ with the private option. Included in the program was a subsidy to schools that participated in the new program; an incentive.  It didn’t work. The highest percentage of the student loan market that Direct Loans ever commanded was 34%.

Despite the limitations of the federally-run Direct Loans, the Majority voted to shut the more successful FFEL program down and consolidate the entire federal student loan program into the Direct Loan program.

For some reason, Democrats believe that with all of the different types of lenders out there – from mortgage lenders, to small business lenders, to consumer lenders – it is student lenders that are ripe for a federal monopoly.

So to those who claim the FFEL program does not work, I would only ask you to look back on the last 40 plus years before the credit crisis that crippled our entire financial system. The private sector is and has been a stable source of capital – it’s one that has served millions of students and families for decades. Instead of trying to keep private capital and innovation out of student lending permanently, perhaps we should be looking for ways to bring it back.

The federal government has its hands in the financial services industry, the insurance industry, the auto industry, and now wants to get its hands on the energy industry, medical industry, and the student loan industry. Not to mention a plethora of new Czars* with no accountability to the American people. Saddling taxpayers with close to $50 billion in additional risk and stripping them of their freedom to choose how to best fund their education is completely irresponsible.

And I find it truly remarkable that at a time when the federal government should be helping create a climate conducive to job growth that they would choose to eliminate an entire private industry that helps students, employs over 35,000 people, and is much more effective than a government run program.”

Funny. I always thought the Direct Loan program worked just fine.

Back in the day (summer o’ 1998 I reckon), Iwas a struggling, nearly starving college student looking to transfer to a real four year university. I’m not ashamed to admit, even now in the summer of the Red Scare v 3.0, that I went all socialistic and borrowed some money from Uncle Sam through the Direct Loan program. Oh and how I enjoyed that harvest of free* federal dollars: not only was I able to afford college classes, but I bought books, pizza to feed myself, and yes, even paid dollars to get into a kegger or two.

Ten years ago, the whole student loan industry didn’t seem like much of an industry it at all. I never saw Student Loan commercials on TV, for instance.  To get information on education loans, I didn’t call a broker or some salesman, I went to the financial aid office and talked to government employees. The Direct Loan program was just about the only game in town.

Compared to me in the late 90s, in the 2000s lots of fly-by night lenders, hawks, userers, options were made available to students like my two younger brothers.Thanks to the magic of the free market system and libertarian pixie dust, they got loans with credit card-like terms and conditions.

Until now.

Sorry Buck but I think getting loans from Uncle Sam works just fine. I should have mine paid off in a year or so and I’ll always be grateful for the investment this country and its programs made in me so that I could be the first person in my family to get a four year degree.

* Rolleyes

** It seemed free at the time, I must not have understood what 5.9% really meant because I’m still paying it off!