CT Blue

There is a sort of replay of the health care debate, writ much smaller, going on now in Congress. The Obama administration wants to go to a single payer system-in the student loan business. This runs counter to the long tradition in this country that mandates that some private company or individual should always be put in a position to divert a goodly portion of government outlays from their intended purpose to themselves. This is private enterprise-emphasis on the private, not so much on the enterprise, as some might call it welfare.

The federal government already makes some loans directly to students, but most federal student loans are handled by private firms even though there is virtually no private capital available for financing the loans. The industry argues that it provides competition and better marketing and servicing of loans.

The administration’s view, shared by a number of Democratic lawmakers, is that the private lenders should no longer be paid by taxpayers to operate a virtually risk-free business in which they essentially use taxpayer dollars to originate loans, with repayment guaranteed, and then resell those loans to the Treasury. (Emphasis added)

It’s not quite clear who these folks provide competition for, unless it’s with each other. Nor is it explained why, in this particular case, we need competition. However, it is an article of faith in this country that competition is always good, so I won’t belabor that point too much, except to say that the track record appears to indicate that the competition takes the shape of fraud. Nonetheless, according to the industry, it is absolutely necessary that it be there to divert $15 billion taxpayer dollars into its own coffers, and out of the hands of student borrowers.

For the moment, things are looking up for the single payer system. But don’t count the do nothing industry out. There’s a lot of money in them thar loans, and all the usual suspects are standing ready to divert our money into the hands of these useless middle people. Naturally, that includes Republicans:

Some Republicans have said that in curtailing the role of private lenders, Democrats are trying to expand government.

Senator Lamar Alexander, Republican of Tennessee and a former federal education secretary, said direct government loans were never meant to monopolize student lending.

“This effort by the Obama administration for a Washington takeover of student loans is just one more example of a long line of Washington takeovers of banks, insurance companies, car companies, health care, that I totally object to,” he said.

It’s sort of hard to see the problem with the government taking over the administration of the loans it is making with its own money, but I’m sure the problem is crystal clear for Republicans. In any event, the status quo is a two-fer for Republicans-a chance to line the pockets of campaign contributors and an opportunity to claim that a government program that they have worked hard to cripple doesn’t work.

As I said, things are looking up on this front at the moment; critical Democrats in the House have grown a spine on the issue. But I’d put my money on the student loan industry, because it will be putting its money into the “people’s” representatives.