An editorial in Monday’s New York Times argued in favor of the Democrat’s “student loan reform bill” – a plan that (as I’ve written in the past) would result in a government takeover of the student loan industry.
Here are five points that, in my estimation, the Times got wrong…
1. While the Times claims that having competition and private sector involvement in the student loan program does nothing to prevent defaults, the facts tell a different story: According to Sallie Mae, students who borrow from them and attend similar types of schools as those who borrow from the Dept. of Education under the Direct Loan program, default at a 30% lower rate. As RedState’s Erick Erickson noted, “…I was advised at a former job to just stop paying my direct loan because nothing would happen, unlike with my privately handled loans. I still kept up my payments, but I worked with a number of people who didn’t.”
2. This difference in default rates, alone, could save the taxpayers billions of dollars. With the Congressional Budget Office (CBO) estimating that over $1 trillion in new student loans will be made in the next 10 years, a competitive private sector will deliver lower default rates compared to a government monopoly.
3. The New York Times doesn’t think this is a government takeover because the loans will be handled “through colleges and universities.” But when the government is the only “option,” regular Americans call that a government takeover. I suppose the Times also believes a health care public option isn’t a government takeover because doctors, not bureaucrats, would still administer the medicine.
4. The argument that competition is preserved because businesses would have to compete for government contracts to merely administer the loans demonstrate a complete misunderstanding of free markets (and I’m sure it would be news to AFSCME). Real competition in the marketplace would mean that if schools and families don’t like their service, they could choose to go somewhere else. And check out the Department of Education’s idea of competition. The Lexington Institute’s findings about no-bid contracts should have us all concerned.
5. Maybe the Times doesn’t care about job losses as long as they come from the private sector, but the rest of us do. There are thousands of family-supporting private sector student loan jobs that will be lost if this passes. The fact that a few of those jobs would be offset by a couple more government bureaucrats doesn’t bring comfort to those families, nor does it make this good public policy.
Once again, by siding with the Democrats’ plan, the Gray Lady gets it wrong. The answer to the student loans problem is not more government, but more competition and freedom of choice.
