Editore"s Note
Tilting at Windmills

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April 28, 2009

JUDD GREGG NEEDS A HISTORY LESSON.... The Obama administration's proposed reforms of the student-loan system are a no-brainer -- they streamline the process, save money, and help more people go to college. Sen. Judd Gregg (R-N.H.), however, remains staunchly opposed, on purely ideological grounds. (via Tim Fernholz)

The Democrats, he says, pulled the same public-private switcheroo before with student loans for college. Back in the late 1990s, "there was a huge debate in the committee . . . between myself and [Senator Ted] Kennedy over a private plan versus a public plan." In the end, they compromised -- the government would offer loans directly to students, but that program would have to compete with private-sector lenders. "And the agreement was very formal, and the record shows this very clearly. We agreed to level the playing field, put both plans on the playing field at an equal status and see who won. Well, private plans won. Big time."

Given the choice, most borrowers went to the private sector for their loans.

I know a lot of political reporters tend to think of Gregg as one of the more serious Republican lawmakers when it comes to reality, but the guy simply doesn't know what he's talking about.

When Clinton compromised in the '90s and created a level playing field, colleges were allowed to choose between direct loans and guaranteed loans. Private plans lost, big time, for quite a while. Eventually, however, the tide turned, and colleges shifted away from the public plan.

Was it because the private sector was superior? No, it was because the private sector was bribing college-loan administrators.

[I]t now turns out that the private lenders' success came not through superior efficiency but through superior graft. The emerging college-loan kickback scandal is a vast scheme by private lenders to bribe colleges into foisting their services onto students. Lenders plied college-loan officers with meals, cruises, and other gifts. Some loan officers were given lucrative stock offers. Columbia's director of undergraduate financial aid purchased stock in Student Loan Xpress -- which became one of that school's preferred lenders -- for $1 per share and sold it two years later for $10 per share. Some lenders offered millions to the universities themselves to drop out of the direct-lending program.

So this whole scandal could have been avoided if Bill Clinton had just gotten his way.... Indeed, the very thing that drove conservatives to oppose Clinton's reform -- the vast private profits made available by guaranteed loans -- is what enabled the scandal.

We're quickly reaching the point at which we should effectively assume the opposite of whatever Gregg is saying is true.

Steve Benen 11:00 AM Permalink | Trackbacks | Comments (16)

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Steve Benen wrote: "... the private sector was bribing college-loan administrators."

From the point of view of the Republicans, that's a feature, not a bug. Corruption is a central organizing principle of the Republican philosophy of government.

Steve Benen wrote: "We're quickly reaching the point at which we should effectively assume the opposite of whatever Gregg is saying is true."

Sure. But it's not because Gregg is ignorant, or silly, or delusional, or crazy, or "needs a history lesson". It's because Gregg, like other Republicans, is a deliberate liar.

Posted by: SecularAnimist on April 28, 2009 at 11:06 AM | PERMALINK

Seems to me that whenever The Great Invisible Hand of the Free Market is involved, it is on the end of the arm of someone playing by a different set of rules than the rest of everyone else on the field and lining the pockets of decision makers.

Posted by: jcricket on April 28, 2009 at 11:07 AM | PERMALINK

This would be (Secretary of Commerce) Gregg. What on earth were the Obamaists thinking? What does that say about their other economics-trade-finance related appointments?

Posted by: Greg Worley on April 28, 2009 at 11:13 AM | PERMALINK

It would be really nice if the "journalists" in the corporate-controlled media had the knowledge and the courage to challenge Gregg and the other Republicans when they're spouting nonsense like this.

But then, it would be really nice if I was cast to star in a movie as the romantic lead opposite Eliza Dushku.


Posted by: SteveT on April 28, 2009 at 11:17 AM | PERMALINK

This isn't quite true. The private lenders also passed on some of the federal subsidy $$ to students, resulting in slightly cheaper loans than the Federal Direct program. I used to work in student loans, and the rates of citi and sallie mae were always slightly better, and dressed up with incentives (that most students didn't meet) to look much better. Once they started removing the subsidies to lenders and creating a real level playing field, the Direct program was the better rate loan.

But they also changed the rate on the loans 3 years ago, it used to float based on market rates, but now it is fixed at 6.8%, much higher than it would be under the old regime. This was a clever way of boosting revenues at the expense of college students.

Posted by: buzz on April 28, 2009 at 11:24 AM | PERMALINK

We long ago reached the point at which we effectively assume the opposite of whatever Republicans say is true.

Fixed.

Posted by: Screamin' Demon on April 28, 2009 at 11:35 AM | PERMALINK

I don't understand why the government is expected to back these "private" loans. That alone undermines the "free-market" principle these loons support.

The reality has always been that there are certain things the government can do better, but Big Business keeps fighting off the competition. And we're to imagine this is somehow good for the "free" market.

Posted by: Doctor Biobrain on April 28, 2009 at 11:52 AM | PERMALINK

"We agreed to level the playing field, put both plans on the playing field at an equal status and see who won."

Please remember this jargon, how it turned out, and what it was obviously meant to imply from the beginning, when you start hearing the exact same rhetoric about a public health care plan.

This will be the "reasonable" compromise, that maybe if we're lucky in 10 or 15 years the "reasonable" people will see as the waste of time and money to no benefit that it will be, and that it will be a "no-brainer" to put it back to what it should have been from the start. Because stars forbid we should care more about results than stroking egos and filling industry pockets...

Posted by: tatere on April 28, 2009 at 12:01 PM | PERMALINK

I used to work at Direct Loans and most people that worked there said if they knew the program even existed when they were looking for loans, it would have been the only game going. And the confusion of sub and unsub loans made a difference, especially when some of them were told the sub loans were better and others were told the unsub were better. I think the major difference that mattered to so many was the fact that there were options by the government to defer the payments for a period of time if they had a problem, such as no job, when it came time to repay the loans.

Posted by: Schtick on April 28, 2009 at 12:05 PM | PERMALINK

"When Clinton compromised in the '90s and created a level playing field, colleges were allowed to choose between direct loans and guaranteed loans. Private plans lost, big time..."

Which is EXACTLY why President Clinton agreed to the compromise, and why the Congressional Republicans are currently so opposed to a public option for healthcare.

Posted by: Joe Friday on April 28, 2009 at 12:30 PM | PERMALINK

Gregg and the other Republican mouthpieces know they are lying. They don't need a history lesson, they need to be hit in the head with a baseball bat (to borrow Ann Coulter's "cure" for liberalism).

Posted by: qwerty on April 28, 2009 at 12:45 PM | PERMALINK

I went to college at 2 different schools, one was a direct lender and one went through private plans. The direct loan system was more streamlined, easier to understand, and easier to take care of when I gradued. The private system was a complete mess, very confusing, having to select lenders and wade through interest rates and clauses every term,. I hated it and ended up with tons of different bills after I graduated, most of which made no sense - except for the direct one.

The direct loan system is simply better for students. For taxpayers? It's not even close. The private system wouldn't exist without the federal government backing the private loans, which sort of ruins the "private" part of the system. And the private companies aren't just bribing loan administrators, they used loopholes to rob taxpayers blind (getting subsidized at much higher interest rates than they were supposed to) while the Bush administration gave them a thumbs up.

The private system is just a big corporate welfare scheme.

Posted by: Joshua on April 28, 2009 at 1:17 PM | PERMALINK

Judd Gregg wouldn't know a level playing field if he tripped on it (believe me it can be done, I've managed).

A level playing field would require identical costs to the Treasury and identical terms for the students. Clearly this is not the current situation. Private plans cost the Treasury more. Therefore the playing field is not level.

This is a separate issue from corruption of university officials. Even if private plans survived using legal means, their survival wouldn't demonstrate efficiency.

Posted by: Robert Waldmann on April 28, 2009 at 1:53 PM | PERMALINK

qwerty, watch out for Coulter's bat. You do know where she's reputed to hide it?

Posted by: Doug on April 28, 2009 at 4:42 PM | PERMALINK

Gregg knows there are no consequences to his lying...no accountability because he's not running for office again. Offering a position to this man was one of Obama's staffs' biggest blunders. He's a snarling resentful conservative whose opinions are clearly aimed to smear democratic successes.

His willful ignorance shows the laziness of his office to start with facts and end with conclusions rather than the other way around, trying to find facts to support pre formed conclusions (even if he has to make them up or twist them dramatically).

Posted by: bjobotts on April 28, 2009 at 5:31 PM | PERMALINK

btw...how is it that before Reagan, going to college in California was free of tuition costs.

If we were to roll back the Reagan tax cuts higher education would be free again as well as having a national health care ins plan for everyone like Medicare for all. and money to rebuild our infrastructure. It's patently obvious that 30yrs of Reaganomics has virtually destroyed our economy.

Roll back the Reagan tax cuts and watch America flourish again. Only a bought and paid for congress would stand in the way.

Posted by: bjobotts on April 28, 2009 at 5:40 PM | PERMALINK




 

 

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