There was really no justification for the status quo ante in the federal student loan program. The model was this: Students applied for a loan from a private loan company, which loaned them money guaranteed by the federal government. They pocketed the profits, and all risk was assumed by the federal government. Students who had access to this program’s version of the “public option” got the exact same deal without federal money being siphoned off to bankers’ pockets. This was, incidentally, much cheaper – doing the same program directly rather than through private lenders would save huge amounts of money, to the tune of roughly $60 billion over ten years. Now, one might think that the status quo is indefensible. Of course, the Republican Party is pretty much always ready to stand behind any form of corporate welfare. Thus when the Democrats bundled student loan reform into the healthcare bill, you had Republicans twisting themselves into knots as to why the Democrats should not save money while doing the exact same thing the government has done for decades. It also gave rise to one of my favorite and least convincing pieces of political discourse as of late:
“The Democratic majority decided, well look, while we’re at it, let’s have another Washington takeover,” said Senator Lamar Alexander, Republican of Tennessee and a former federal education secretary. “Let’s take over the federal student loan program.”
He just tried to demagogue the federal government taking over a federal program. Let’s reflect on that for a bit, and move on.