As I’ve said before I’m a passionate Beck supporter. He’s the most important conservative commentator and the best host on Fox News. He really GETS the Left. But just as he’s ridiculously wrong about Geert Wilders being a fascist he’s REALLY wrong about student loans.
He just said on his show that the Obama plan would make it so only the federal government could issue loans to students. This isn’t true at all.
I’m not going to get too into this now because it really deserves a more in-depth treatment than I have time for right now. (So get ready for a deeper exploration of the subject some time soon.) But let me just explain the Obama plan briefly:
There are 4 kinds of student loans right now: private loans, federally-guaranteed student loans, state-guaranteed student loans, and direct loans. Private loans are no different than credit cards. They have high interest rates and are issued by private banks. Nobody likes getting private loans. They’re the loans of last resort. Federally-insured and state-insured loans are still issued by private banks but are much more desirable (to both borrowers and lenders) because governments (state and federal) act as guarantors on the loans. If the borrower defaults on the loan then tax dollars pay the bank everything that is owed. (Ridiculously sweet deal for the banks!) These loans have much lower interest rates and more manageable repayment programs. (Forbearance, unemployment deferments, and economic hardship deferments can delay payments for as much as a decade or more.) Direct loans are those issued directly from the federal government. Direct loans eliminate the unnecessary middle-man of the banks.
Obama’s plan is to eliminate the system of federally-insured loans (known as FFELP) and just expand the direct loan program instead. It would not cost anything more than is already being spent right now. The positive aspect of the program is that taxpayer dollars are spent more efficiently. There will no longer be any free taxpayer money given to banks for doing absolutely nothing of value. And banks will still be able to issue private loans to the poor souls who choose to take them out.
(And no, Glenn, governments will not be dictating where people go to school.)
How do I know about all this? Because for more than a year and a half I worked as a collector and later a senior collector (the equivalent of an assistant manager) at a student loan company. It was one of the experiences that propelled me to the Right. As a collector I learned all about human nature and capitalism. (I also poured my energy into learning the ins and outs of federally-insured student loans.) And ultimately I also learned that government and corporations really should not share the same bed. I don’t have the anti-corporate viciousness that I had when I was a leftist but I do still recognize the nature of such institutions. All a corporation does is try and accumulate as much profit as possible. They suck value out of anything and everything — including our government if we are dumb enough to let them.
Our tax dollars should not be going to artificially inflate the profits of corporations. And that’s what’s happening right now with the current student loan status quo. American tax dollars are being wasted. (Big surprise there!)
Glenn, you’re right to be concerned about this stuff but you’ve got it all backwards. This isn’t a government take-over of student loans. Government took over the student loan industry more than 20 years ago when they created a cheaper product subsidized by our tax dollars. (Federally-insured loans now dominate the industry. If you’re going to college then you will pick federal loans over private ones because they’re cheaper and easy to manage.) This is just a move to make the system more efficient and less corrupt so that less of our tax dollars are wasted on corporate profits. It’s not a good proposal by any means — and the question of whether the government should be involved at all is entirely legitimate — but it’s certainly a hell of a lot better than what we have now.
(P.S. Don’t take my word for it on this stuff. Dick Morris has pretty much the same view as I do.)