Schoolyard Bullies; Obama Officials Try to Force out Private Lenders for Student Loans

Article excerpt


Imagine what the outcry would be if the House of Representatives somehow passed a bill outlawing charter schools nationwide and, before the Senate had even considered the bill, officials throughout government began writing to school districts telling them to start planning to eliminate charters. The backlash would be enormous. How dare they pressure school districts to kill charter schools before the law actually has changed?

Yet that is exactly what Secretary of Education Arne Duncan, other department officials and several congressmen have been doing with regard to an attempted federal takeover of the entire student-loan industry. About 75 percent of colleges administer most of their student loans through private companies, backed by federal guarantees in the Federal Family Education Loan Program (FFEL). The other 25 percent of loans come through the Department of Education's own Direct Loan Program, which is the education version of health care's public option. Colleges and families apparently think the private program provides better services, which is why it still serves such an overwhelming majority of the market a full 16 years after the Direct Loan Program was created to compete with it.

For reasons both various and spurious, congressional liberals long have wanted to eliminate the private lenders. Finally, with huge Democratic majorities in both chambers of Congress, they saw their chance. The House already has passed a bill, misnamed the Student Aid and Fiscal Responsibility Act (SAFRA), that would run all government-assisted student loans through the Direct Loan Program, eliminating the private option.

But that's just the House. Chances for passage in the Senate look increasingly dicey. Senators are becoming sensitive to public anger about the federal government's takeover craze, which already has snared banks and car companies. People also recognize that private lenders employ about 35,000 workers, many of whom would lose their jobs if SAFRA passes. …