The U.S. Department of Education operates two competing loan programs. Under the original Federal Family Education Loan (FFEL) program, private companies provide the capital and administer the loans, which are largely subsidized and insured by the government. Under the William D. Ford Direct Loan Program, the Department administers loans to borrowers.
In May the House of Representatives passed the Student Loan Sunshine Act in response to criticism of the $85 billion per year student loan industry.
The legislation would bar private companies from offering perks, a.k.a. kickbacks, to colleges and universities in exchange for student loan business and would require student loan companies to disclose their relationships with schools.
The Senate education committee approved its version of the legislation yesterday, one week after the House education panel took similar action. Senior Democrats predicted that the bills would come to a vote by the end of next month and would be reconciled without significant difficulty.
The House plan explicitly exempts the government's own student loan program from the new disclosure requirements. Prompting the Leslie Carbone to write in the Sun-Sentinel:
The Sunshine Act forces private companies, which operate under the FFEL program, into the light, but leaves the government's Direct Loan program under the cover of darkness.A similar thought caused Allison Kasic to post: "The Federal Government has found a new theme song in Bill Withers’ classic “Ain’t No Sunshine.”
According to Carbone, the Sunshine Act's hypocritical exemption of the Direct Loan program creates two sets of rules — one for the government and one for everybody else. This violation of American ideals will restrict students' consumer choice, allow the government's program to flourish, and is a step toward scaling back, or eliminating, the private sector FFEL program.
Citizens Against Government Waste (CAGW) analyzed the management of and cost differences between FFELP and FDLP as well as the extent to which such expenses are borne by taxpayers.
CAGW found the government program is losing money. In typical big government fashion it has paid more in interest to the Treasury than the amount of interest it has gotten back from borrowers. CAGW concluded:
After spending 10 years in college with little to show in return except an $13 billion deficit, it is apparent FDLP is flunking out.Will so-called reform of the Student Loan industry become an issue in the 2008 presidential campaign? I doubt it, but Andrew Cuomo, attorney general of New York, sent a letter to presidential wannabee, Connecticut Senator Chris Dodd, complaining about how the school a student attends can determine the interest rate on student loans. Dodd, unable to gain in traction in his presidential race is willing to try to make anything a presidential campaign issue.
With Senator Kennedy and the Democrats trying to "reform" student loans in Hugo Chavez fashion - requiring the government to run it regardless of the financial losses, I'm reminded of what Everett Dirksen used to say about government programs:
A billion here, a billion there, and pretty soon you're talking real money.I think I will just go listen to to more Bill Withers. Ain' t no sunshine . . .
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