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Boston Globe

February 16, 2010

http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2010/02/16/socialism_for_student_lenders/

IF EVER there were an example of "socialism for the rich, capitalism for the poor,'' it's the nation's student lending system. Industry giants receive government subsidies to originate and administer government-backed student loans. These loans bring little to no risk and huge profits, even as college students and graduates struggle under the weight of crushing debt during a down economy.

President Obama wants to save taxpayers $80 billion over the next 10 years by eliminating wasteful subsidies to the private student loan industry. That money would be far better spent on expanding direct federal loans to students. But after the House passed a student loan reform bill last fall, the industry has dumped tens of millions of dollars into lobbying.

The Senate should ignore the pleas of Sallie Mae and its competitors, which have long profited off of an inefficient arrangement, and pass a bill similar to the House measure

Predictably, the lenders who want to hang onto their government subsidies have smeared Obama's efforts as a "government takeover'' of the loan industry, and have claimed that it will lead to lost jobs at Sallie Mae and other large loan companies. The rhetoric is misleading. These loans have always constituted a government program, since the government has absorbed the vast majority of their risk and cost. Moreover, private companies would still service the loans; they just wouldn't originate them or receive subsidies.

Obama's plan to streamline federal student loans is long overdue. The Senate shouldn't let the industry's scare tactics lead it astray, and should vote to stop wasting taxpayers' money.