Peter Wood has been active at the NAS site, issuing additional comment on the latest permutation of the ongoing student loan scandal (if you haven’t, do catch his initial summing-up of the case Those Scandlous Student Loans). This week, George Miller, Chair of the House Education and Labor Committee, introduced a bill to reduce federal subsidies of private loan providers and shift the related funds to direct federal loans. Democrats such as Miller have had considerable fun railing against fat-cat student loan companies in recent days (with good reason), but student-loans hardly ever qualified as a “private” enterprise in any traditional sense of the term. As Wood observes:
For decades, Republicans have been stalwart supporters of “private” lending for higher education, as opposed to direct federal spending. Of course, an industry addicted to federal subsidies and guarantees is private in a highly qualified sense. It has socialized its risks and privatized its profits. It would take rather advanced financial modeling to figure out whether the residual benefits of the private sector save the taxpayer more money than the industry managed to scam from the program.
In any case, the political balance has decidedly shifted in favor of a renewed effort to use direct federal loans to students. The opportunities for malfeasance, corruption, and inefficiency in this program are not to be underestimated either. But at least it will be a different malfeasance, corruption, and inefficiency — and that will feel good. Of course, the private student loan industry won’t be shutting down. The price of Sallie Mae has fallen, but the business will continue at a slightly less robust profit margin.
In other words, a sunny future. Read all of his thoughts at NAS.