Now that we know that the financial-services companies that process subsidized student loans have corrupted not only the government agency that’s supposed to regulate them but university financial-aid officers as well, I can’t think of a single damned reason to allow that industry to continue to exist. If the federal government wants to subsidize student loans, which is a pretty good idea, then why shouldn’t it make the loans itself, or let the educational institutions do so, rather than letting a bunch of middlemen make money on the deal?
Update A reader responds:
Another Bush II uber-blatant variation on a very old theme.
In fact, there were huge scandals about subsidized loans and proprietary schools, such as Bell & Howell’s, in the early 70s. In those days, the idea was to sign up the halt, the lame, the blind and the imbecilic for vocational training. They’d take out insured loans whose proceeds went immediately and in full to the schools. The students would quit in short order, and the state — which then administered the program — would have to go after the students for the money — everyone else having taken their nick.
I have vivid memories of the 70s scandal since I briefly represented the Ohio Student Loan Commission during it. I think there was a similar scandal during the Reagan/Bush I years.
The new provisions eliminating the possibility of discharging the loans in bankruptcy and the high interest rates attached to these virtually no-risk loans make them a slime-bag’s wet dream. These guys make the NCAA look like St. Francis.
In my cynical youth I thought the student loan system for financing higher education was, with the Drug War, the means by which the Rs decided to insure a docile, educated corporate workforce. Only the richest students — the ones who paid cash for their education — could afford to be radicals and/or take on government or NGO jobs on graduation. (Another way, in Grover Norquist’s immortal phrase, to starve the beast.) After seeing Deputy AG Goodling, et al., I’ve learnt I just hadn’t identified all the dimensions of the scheme.