Post to Political Whirlwind Blog

This comment relates to the article dated October 5, 2009, titled "Show Me the (or my) Money!!"



In its present form, H.R 3221, the Student Aid and Fiscal Responsibility Act of 2009 will eliminate the Federal Family Education Loan Program (FFEL), which uses private companies to issue government backed loans. The new program would be a government-run, taxpayer financed system, managed by the Federal Direct Loan program (DL). Supporters are making many claims about the benefits to students. The problem with the proposal is that from the start, the government is taking on more responsibility than taxpayers can afford.

According to the Congressional Budget Office Cost Estimate for H.R. 3221, this new program will likely cost taxpayers more than the program currently being managed by the private sector. The government plans to: reduce program revenue by lowering the interest costs to students; take on management expenses for these student loan programs that will eventually, exceed the cost of the subsidies being saved in the near term; and fund additional undergraduate Pell Grants (Free Money) by borrowing from the treasury, and reducing the amount of student loans available for post undergraduate education. The government wants to seem like the savior for lower income households, but the current plan is fiscally irresponsible.

We are talking about turning over the current lending program to the DL, which was created in 1993 by President Clinton. This division of the government has lost money for taxpayers every year since it was created. A 2004 GAO report measured the unit's cash flows from 1995 – 2003, and the total cash outflows exceeded the total cash inflows by $10.7 billion. The deficit was the result of higher interest rates paid to the treasury than those collected from borrowers. It is not OK for the government to do additional business in this manner.

As a taxpayer, I believe the government should take over these loan programs, but the budget needs to be balanced. Everyone in this country should be entitled to borrow the money required for higher education, but students need to accept that nothing in life is free. We should eliminate Pell Grants (free money), and simply make government loans to students as long as, they maintain good grades, and are following a degree plan which will lead to a productive job that will allow them to repay the money borrowed, including a sensible rate of interest.

A normal student loan payment after finishing an undergraduate degree is $70 per month for every $10,000 borrowed. The interest rate is 6%. There is no reason a student cannot figure this type of a payment into their budget after graduation. Students should borrow, learn, earn, and then payback all the money they were able to use for their education; this will allow future generations to have the same opportunity.