Obama’s big blow to banks: Student loan reform
OPINION - This initiative would save over $60 billion dollars over 10 years by ending subsidies to commercial and private lenders providing student loans...
While Tea Party members were hurling racial and anti-gay slurs on the steps of the Capitol building protesting the supposed “government takeover” of health care last week, Congressional Democrats were working behind the scenes with the Obama administration to also overhaul student lending. In September last year, I wrote that the House of Representatives voted along partisan lines, 257 votes to 171, to take private lenders out of the loan business and make the government the primary source of student loans. This direct loan program was touted as the cornerstone of President Obama’s education reform agenda.
Well, Democrats expanded this legislation by embedding it in the reconciliation bill for health care reform. And it’s a big blow to big banks. It is an end to “corporate welfare,” at least in the student lending business. This initiative would save over $60 billion dollars over 10 years by ending subsidies to commercial and private lenders providing student loans. The savings from the subsidies will be channeled into expanding the Pell Grant program and shoring up funding for ever-growing community colleges and financially strapped historically black colleges and universities. The law will also attempt to cap student loan debt at 10 percent of a college graduate’s income. Unfortunately, students already mired in loan debt won’t qualify for this relief under this new law.
But the battle wages on. Those Republicans who fought against big government (or as the Tea Partiers call it “Socialist government”) initiatives like universal health care are attempting to shoot down the student loan initiative, viewing it as overreaching and back door retribution against banks for squandering bailout funds. This view is unsubstantiated. In fact, many industrialized countries with state-sponsored health care also have impressive government support for higher education. England, our ally and free-market role model, provides cradle to grave medical coverage and virtually free higher education for low income students. It’s probably the closest we get to a Socialist-type market economy than other countries in the European union.
President Obama’s initiative is the most aggressive domestic reform agenda we have witnessed in a long time on this side of the pond. He states that “education and health are the two most important pillars in America.” Indeed they are the two biggest industries in the United States, employing millions and generating over billions of dollars in revenue. And yet these two giant industries are also known for bilking consumers through inflated costs and reduced services.
As with health care costs, the next move for Obama is to mandate a cap on the rising cost of college tuition on those higher education institutions receiving federal funds. Rising tuition has been outpacing inflation for the last decade or more, while college classroom sizes become larger and taught increasingly by low-paid adjunct faculty. Indeed, we have essentially made college unaffordable for families. What if we made college affordable again? Now that would be revolutionary.
