I'd be lying if I tried to play it cool and say I wasn't very, very excited about this opportunity. Let me know what you think, i've gotten a dozen emails already.
Robbing Joe College to Pay Sallie Mae
THE higher education financing system in this country, like the health care system, is broken. In both cases, costs spiral out of control while millions of people, especially the poor, are not served. And in both cases, a few corporations are making hefty profits.
From the 1950's to the 1970's, college attendance grew along with federal student grant aid. Then, as tuition mushroomed and loans replaced grants, educational attainment stagnated. Today, those lucky enough to graduate from college end up with an average of $17,600 in loans, a burden that shapes decisions like buying a house or having children. But most young people are not so lucky - half of those who start college do not graduate at all, in part because of the financial burden of staying in school. As a result, Americans aged 25 to 34 are less educated than 45- to 54-year-olds - and more to the point, less educated on average than the citizens of several other industrialized nations.
The federal student aid system fails students, but it does a great job of delivering profits to private lenders, which issued $65 billion in loans last year. When it created the loan program, Congress assumed that banks would not lend to young people without extensive guarantees and incentives. So they guaranteed a certain rate of return on student loans, made up their losses on defaulters, created a secondary market for student loans by chartering the Student Loan Marketing Corporation (Sallie Mae) and allowed state lending authorities to issue tax-exempt bonds to raise loan capital. Student lending has grown into a highly profitable and low-default market, yet these special privileges persist.
Sallie Mae, the private company that makes, buys and sells the most student loans, boasted the second-highest return on revenue in the 2005 Fortune 500. Sallie Mae also happens to be the largest contributor, by far, to members of the House Education Committee. The Chronicle of Higher Education found that the committee chairman alone, John Boehner of Ohio, received $172,000 from student lenders and loan consolidators in 2003 and 2004.
It's thus no surprise that lawmakers are apt to protect lenders and not students. On Oct. 26, Mr. Boehner's committee approved more than $14 billion in cuts over the next six years, which would be the largest reduction in the history of the federal student aid program. Mr. Boehner defended the cuts by saying they mostly came from corporate subsidies to Sallie Mae, Bank One, Citibank and the rest. But that gets to the heart of what is wrong with this program - and the way to fix it. The best way to reverse the shocking trends in debt and educational attainment would be to switch from loans back to grants. Given ballooning deficits, though, that's a nonstarter. Instead, why not cut off subsidies to banks and give that money to needy students?
One way to do that is to expand a program begun in 1992 in which the government makes loans directly. A recent Government Accountability Office report showed that direct loans cost the government one-fifth as much as subsidized loans over the past 10 years. Mr. Boehner, however, kept the report under wraps for 30 days, and it was released just hours before the House committee vote. Representative George Miller, Democrat of California, estimates that the aid program could save $60 billion over the next decade by switching entirely to direct loans - enough for almost a 50 percent increase in Pell Grant money.
A group of students has also proposed a National Tuition Endowment, which would preserve an estimated $30 billion for need-based grants by cutting loan subsidies and finally closing an infamous loophole that has lenders collecting 9.5 percent interest from the government on certain loans.
Yet Mr. Boehner is heading in a different direction. He told an audience of commercial student lenders earlier this month that "I've got enough rabbits up my sleeve" to make them happier with the bill.
With the higher education budget scheduled for passage next year, this is a great occasion for a public debate on the values that conservatives claim, like individual self-determination, free markets and international competitiveness. Do we want to keep robbing from our future?