Each semester some 60 percent of undergraduate students in the U.S. voluntarily let a specter haunt their lives as they take on the burden of a student loan in order to pay for school. Those who have loans experience the cold wind and sinking feeling, which deepen every semester as their graduation date approaches and payment becomes due.
As things stand now, the student loan industry is a cyborg of public and private interests – loans are originated by private, for-profit entities, the largest of which is Sallie Mae. But these loans are then guaranteed by the federal government and the companies that originate them are further subsidized by tax dollars. Essentially, private lenders get to have their cake and eat it too, with virtually guaranteed profits.
The Student Aid and Fiscal Responsibility Act seeks to lift that sinking feeling. The plan is to essentially eliminate private lending from the picture altogether, and replace it with loans originated directly from the federal government itself. No private profits necessary.
The bill is stalled in the Senate, due in large part to an apparently effective lobbying campaign by the student loan industry to paint the proposal as government takeover which would put a damper on the economy: Sallie Mae claims that 35,000 jobs would be lost if private lending were banished from student loans, and at a time when unemployment has just spilled over into double digits.
White House officials estimate that $87 billion would be saved over the next 10 years by eliminating private lenders. A more conservative estimate from the Congressional Budget Office puts the number at about $80 billion.
It is worth remembering that “saved” in this context means that money would remain in the federal budget, to be used on other educational projects like expanded Pell grants and similar programs, rather than being spoon fed to for-profit companies. This seems especially important for UVU, where many poor, non-traditional students who need aid come to learn. Expanded aid could make all the difference.
Some simple math is in order to put things in perspective. If you take the conservative government estimate and divide it by the (likely overstated) number of lost jobs offered by Sallie Mae in its campaign to kill the act, what you get is a very rough estimate of the cost to the government of maintaining a single job in this industry: roughly $2.3 million, or $230,000 per job, per year over 10 years. That sounds like an awful lot of public money to spend in order to keep an ostensibly “private” industry operating.
Opponents of the bill have made the same tired claims about government inefficiency and socialization that any bill of this kind would receive. However, the idea that spending money to keep student aid expensive and less available is more efficient than saving money and expanding availability doesn’t quite ring true.
You might make the argument that a much better way of doing all of this is to make free public higher education available to all, an accomplishment achieved by some of our European neighbors. But, considering that idea smells faintly of peyote, perhaps the Student Aid and Fiscal Responsibility Act is an appropriately sober step in the right direction.
