Student-loan silliness

STUDENT-LOAN SILLINESS…. This is one of those strange stories in which Democrats want to spend less money and make a federal system more efficient, and conservatives are livid.

The situation is pretty straightforward. When Clinton was elected, the student-loan system was burdened by a layer of unnecessary bureaucracy. Higher-ed students would get a loan from a private lender, but it was effectively a no-risk system — the federal government would guarantee the loan in the event of default. The industry was getting government subsidies to provide a service the government could perform for less. Clinton wanted to streamline the process and make it cost less — the government would make the loan, cut out the middleman, and save billions.

Conservatives and loan industry lobbyists went nuts, forcing Clinton to backtrack. The eventual compromise led to two types of student loans — direct loans and guaranteed loans. Colleges were allowed to choose the system they preferred. (They preferred the direct loans until lenders started bribing college-loan administrators.)

Sixteen years later, the Obama administration wants to save $4 billion a year, end subsidies to lenders, and make the process more efficient. The White House and Department of Education have apparently come to the conclusion that there’s no point in laundering loans through lenders, who make a tidy profit, for no reason.

And once again, conservatives are livid. Rep. Howard P. “Buck” McKeon (R-Calif.) railed against a “government takeover of the private-sector-based student loan program.”

Matt Yglesias’ response was spot on:

The government is not, however, “taking over” anything. The government already completely controls the industry since its existence is predicated on the existence of federal subsidies. Obama is simply proposing to cut out the middle man and save some money. […]

The interesting thing here is not just the particulars of the policy, but the bizarre view of the role of government that Howard is espousing. Rather than a debate between progressives who want the government to provide a public service and conservatives who want the service to exist just insofar as it can be supported by the private market, we have a debate where both sides agree that the service ought to exist but the right thinks it’s important that it be done in a less efficient more costly manner because doing it that way generates profits for people who in turn give them money in some kind of nutty sense is supposed to preserve the integrity of the private sector.

Republican lawmakers love cutting spending, improving efficiency, and streamlining government programs. Except when they don’t.

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