Last night Glenn Beck talked about how the Democrats are trying to sneak President Obama’s student loan plan into the Health Care bill.
As I’ve said before I’m a passionate Beck supporter. He’s the most important conservative commentator and the best host on Fox News. He really GETS the Left. But just as he’s ridiculously wrong about Geert Wilders being a fascist he’s REALLY wrong about student loans.
He just said on his show that the Obama plan would make it so only the federal government could issue loans to students. This isn’t true at all.
I’m not going to get too into this now because it really deserves a more in-depth treatment than I have time for right now. (So get ready for a deeper exploration of the subject some time soon.) But let me just explain the Obama plan briefly:
There are 4 kinds of student loans right now: private loans, federally-guaranteed student loans, state-guaranteed student loans, and direct loans. Private loans are no different than credit cards. They have high interest rates and are issued by private banks. Nobody likes getting private loans. They’re the loans of last resort. Federally-insured and state-insured loans are still issued by private banks but are much more desirable (to both borrowers and lenders) because governments (state and federal) act as guarantors on the loans. If the borrower defaults on the loan then tax dollars pay the bank everything that is owed. (Ridiculously sweet deal for the banks!) These loans have much lower interest rates and more manageable repayment programs. (Forbearance, unemployment deferments, and economic hardship deferments can delay payments for as much as a decade or more.) Direct loans are those issued directly from the federal government. Direct loans eliminate the unnecessary middle-man of the banks.
Obama’s plan is to eliminate the system of federally-insured loans (known as FFELP) and just expand the direct loan program instead. It would not cost anything more than is already being spent right now. The positive aspect of the program is that taxpayer dollars are spent more efficiently. There will no longer be any free taxpayer money given to banks for doing absolutely nothing of value. And banks will still be able to issue private loans to the poor souls who choose to take them out.
(And no, Glenn, governments will not be dictating where people go to school.)
How do I know about all this? Because for more than a year and a half I worked as a collector and later a senior collector (the equivalent of an assistant manager) at a student loan company. It was one of the experiences that propelled me to the Right. As a collector I learned all about human nature and capitalism. (I also poured my energy into learning the ins and outs of federally-insured student loans.) And ultimately I also learned that government and corporations really should not share the same bed. I don’t have the anti-corporate viciousness that I had when I was a leftist but I do still recognize the nature of such institutions. All a corporation does is try and accumulate as much profit as possible. They suck value out of anything and everything — including our government if we are dumb enough to let them.
Our tax dollars should not be going to artificially inflate the profits of corporations. And that’s what’s happening right now with the current student loan status quo. American tax dollars are being wasted. (Big surprise there!)
Glenn, you’re right to be concerned about this stuff but you’ve got it all backwards. This isn’t a government take-over of student loans. Government took over the student loan industry more than 20 years ago when they created a cheaper product subsidized by our tax dollars. (Federally-insured loans now dominate the industry. If you’re going to college then you will pick federal loans over private ones because they’re cheaper and easy to manage.) This is just a move to make the system more efficient and less corrupt so that less of our tax dollars are wasted on corporate profits. It’s not a good proposal by any means — and the question of whether the government should be involved at all is entirely legitimate — but it’s certainly a hell of a lot better than what we have now.
(P.S. Don’t take my word for it on this stuff. Dick Morris has pretty much the same view as I do.)
I don't know what this administration plans to do with the student loan change, but you can bet that it will further their agenda.
Read the Dick Morris article I linked to.
Student loan industry changes should not be included in the Health Care Bill. Everything about the Health Care Bill stinks!!!! Then they stuff non-health care related language in the bill. This should only tell us WATCH OUT!!!!
one of the most serious problems with the way bills are presented is the addition of many items in the bill. all bills should be stand alone. no earmarks, nothing, just the bill. if you want the feds to spend money on student loans it has to be stand alone. the same should apply to all bills . roads, bridges, education, everything. all bills should be read by any senator or congressman voting for said bill.
Anyone who would write "There will no longer be any free taxpayer money given to banks for doing absolutely nothing of value," knows not enough about student loans to comment. In fact this is the debate, Financial literacy programs, borrower advocacy programs, FASFA assistance programs, student outreach to assist the disadvantaged understand Finacial Aid and navigate the process, and much more, are all products of the FFEL program and all go away under the currently proposed legislation.
Yes, the program needs some measure of reform. "Eliminating the middle man" is NOT the way to do it. There is value in the competitve forces of the private sector. NONE OF THE ABOVE PROGRAMS were developed through the creativity of the Department of Education.
I worked in the industry for more than a year and a half. I know enough to comment.
There is no value in the "competitive forces" in the current system. This is a ridiculous chimera. What does it matter if someone gets a federally-insured student loan from Nelnet, ACS, or Sallie Mae? This kind of choice makes no difference. In fact it's not really a choice that most students actually have. It's not like when you're going to college you weigh Nelnet vs ACS vs Sallie Mae. You just go with whichever company has made the sweetheart deal with the college you happen to be going to.
"Choice" here isn't really a choice at all. This argument is just student loan industry propaganda.
A whole year and a half. Wow. That is almost not enough to even be worth noting.
You know obviously so very little. Your reply is evidence of it. I wrote of the post graduation repayment period and the hundreds millions of dollars save by borrowers and taxpayers through the creative efforts of many NOT in FDSL.
But, then I should know not to argue with fools as passers-by know not the difference.
Glenn Beck in many ways exists as a Bill Clinton figure in my mind. Per Morris, Bill Clinton became governor of Arkansas because he presented an image of everyone's son. Then he became President in 1992 by running as everyone's brother. In 1996, he became President by being everyone's father.
A problem with focusing on your image however. One can only focus on one thing at a time and reality always exists as a hazard. Unfortunately in Beck's case the facts got him this time. Unfortunately in America's case, Mohammed Atta, may his cowardly soul burn in hell, got us while everyone was focusing on Lewinsky.
Part of the reason evryone was focused on Monica was the same obsessive coverage of Obama. It was all the media obsessed about for far to long. Much like the month before 9/11 was Chandra Levy and the Congressman's affair and her murder. americas short term media driven memory drives me nuts. The same summer before 9/11 was also littered with Palastinian suicide bombers in Isreal funded by…….wait for it…..Saddam. He was paying each family 50,000. So yes, Saddam was supporting terrorisim directly.
In many ways, the masses should not be allowed a direct information stream of the intelligence of the US, like the CIA receives. What we need is a faster release of "chatter" when it is found to be useless by the CIA, which the Obama administration is rightfully building.
I agree with you that not only Saddam Hussein supported Islamic terrorism, but also Islamic terrorism in the name of al Qaeda, as shown in the 1998 safe haven offer to Osama bin Laden after he left the Sudan.
Mr. Swindle misses the point of using a "middle man". The government "contracts" banks to administer student loans instead of direct lending because the government does not want to run loans like the post office or AMTRAK. Using Swindle's argument to its logical conclusion, the government should takeover all SBA loans, BIA loans, EXIM loans, FHA Loans, Fannie, Freddie, Sally, etc, etc….
However, the greater question is- should the federal government be in the loan guarantee business? Why, in the World's wealthiest nation, does the federal government own or guarantee 50% of all home loans? Why, in a nation with thousands of capable state funded community colleges, does the federal government see a need guarantee student loans? The government needs to get out of the loan guarantee business all together and let the free market again run higher education. When that happens, cost will decline and value will go up. Also, maybe parents would be more concerned about leftist curriculum since they will be footing more of the bill. David will be happy…
No. I'm not even arguing that the government should be in the student loan industry at all. In an ideal world it wouldn't.
I'm merely pointing out that IF we're going to have a program whose objective is to make college more affordable and more accessible to students then we should not be wasting money on inflating corporations' profits. All the money should be spent on that objective.
Should we get out of the student loan business all together? Yeah, probably. But that's not exactly a political option right now, is it?
+1. I just made a comment on the end of this insinuating as such…
Perhaps if the government actually also cared about how much money it had available to spend each year on things (like… a balanced budget), then these loans wouldn't be as attractive.
I mean, how can a private company compete with the government, when the latter is comfortable with going in to debt to provide the product?
David: Thank you for your positive comments on Glen Beck. I agree that there is no one doing more to uncover the political left. I haven't seen the debate on Wilders, whom I admire greatly, and hope that the infusion of Saudi money hasn't hurt Fox's ability to deliver hard news. I have noted that when Glen goes on O'Reily (who has consistently denied Obama's hard left Alinsky ties) that there's a downplaying of the infomation that Beck presents to the public-perhaps to make Beck seem less threatening to O'Reily, who is intent on not "upsetting" his viewers.
The author of this piece has a very low level understanding of the student loan process.
*Yawn.*
Having read your comments it appears my understanding of the process is at least equal to yours. You and I both know that the federally-insured program is not in any way superior to direct lending. The difference is that I am no longer dependent on this program for my livelihood. You are still a slave to it so you will struggle to try and defend it even though intellectually you know it's indefensible.
As a collector or senior collector it is impossible to understand everything that goes into and comes out of the FFEL program. It is not there fault as in a collections enviroment the culter is different. Having served as an executive at both a third party student loan collection agency as well as a Student Loan provider I can tell you beyond a resonable doubt that lenders/servicer and banks are not the bad guys
As an executive in the student loan industry you benefit directly by the money pipeline from the federal government to your industry being maintained.
Why is Sallie Mae such a ridiculously profitable company? It's not doing anything innovative or valuable. It's just taking our tax dollars and converting them into corporate profits.
Lenders/servicers aren't the "bad guys" they're just benefitting from a wildly inefficient system.
Yes they make money and it is a good overall deal because the loans are guaranteed. But profit margins are POURED into borrower benifits, loan forgiveness programs, financial literacy, grants, scholarships and the very highest in servicing services. This is not absolutly nothing as the author indicates and just provides further proof that this is just another example of the misinformed leading the uneducated. FFEL is a good program, DL is a good program, freedom of choice is the best program. Schools have had the choice to move to Direct Lending since Clinton was in office some chose that direction, the majority did not, some that did decided to come back to FFEL for there own reasons. Let the better program stand, let student and families have the choice. Keep tens of thousands of americans at work.
Yes, let's let the better program stand by axing the program that wastes taxpayer money on corporate profits. You're unable to explain how federally-insured loans are in ANY WAY superior to direct loans. And that's because deep down you know that the only way that they're better is that they benefit you. You care more about what's good for you and your industry than what's best for the country and the American taxpayer.
"Highest level in servicing procedures" is an absurd joke as my year and a half of experience in the industry can attest.
Have any of you actually had a loan through Sallie Mae? That company is run like the mafia. They have given Universities kickbacks to use their loans. Is that right???? The loans have horrible fees and interst rates. You have no consumer protections. A person with gambling debt can file bankruptcy on their debts but not with Private Student Loans. I don't think you should be able to with Government Loans. You don't need to cause they will work with you. Not these Private Loan companies. The customer service is the worst service I have ever seen. I have heard a couple dumb Republican Congressmen say the only reason they don't want this is because Sallie Mae and NELNET might lose around 5,000 jobs. Come on now!!!! The reason is because they get political contributions from these companies!!! They have lobbied and lobbied in Washington. Finally I think the students will benefit from this instead of the fat cats in Washington!
"All a corporation does is try and accumulate as much profit as possible. They suck value out of anything and everything — including our government if we are dumb enough to let them."
Lot of truth to this. I'm an independent contractor paid by the government. They've subcontracted out the payment part, so a private company sends me checks. The private company gets paid based on how much they spend. This perhaps explains why my paycheck arrives in an overnight fedex envelope rather than direct deposit (they've even paid $20 to send me a $200 travel reimbursement when a 1st class stamp would do). This perhaps explains why when this private company organizes a meeting for people on the project plane tickets are bought the last week, and the hotel is organized at the last minute.
Of course, it could just be incompetence – after all they sent me an extra paycheck and it took me weeks to convince them that they overpaid me. If was only because I was keeping a copy of every check that I was able to win that argument.
There is a belief on the right that government can't handle administration of these sorts of things. I used to think this was true – now I think that our tax dollars are being wasted for the mistaken belief that private companies are more efficient.
There are private student loans and there are private student loans. There is one type of private loan lender that did not get burned in the housing bubble and is making loans with rates and benefits that are better than federal loans. The catch is that you need a good credit cosigner, which you don't with federal loans. If this bill passes, the only students that will be taking out federal student loans in 5 years will be those with no credit or poor credit.
I think the main problem is that the government is giving these companies TAX PAYER dollars to provide education loans.
Another issue is that the government itself, if providing tax payer dollars to provide education loans as well.
The former is probably a result of the latter.
If there was NO SOURCE of government education loans (they never existed), what would we do? … seek lower cost schools, save money, seek alternative education sources, support banks that offer flexible loans and a good service and product.
With government involvement there is a product private companies cannot compete with, and things get all sorts of crazy.
Education is not a right. Its our personal responsibility (and if we treated it more that way, we might actually pay more attention in classes!).
Quit pretending like the government owes it to us to provide us loans, and recognize that it is BECAUSE they provide us the loans that the system is all messed up.
Well I have Sallie Mae Loans and I have yet to speak to someone that has a first language as English. They have outsource all the jobs so please stop pretending that loan companies provide American citizens jobs. That is a myth!
$36 billion of the "projected" savings from this goverment takeover are designated for Pell Grants, which most middle-class families will never qualify to receive. If you are a student from a hard-working middle-class family, you are not welcome to share in the "projected" savings from the take-over. The funds will go to Pell Grants (low-income only), with the balanced directed toward paying-off the public debt. Again, the middle-class takes yet another hit.
greetings – wonderful write-up! Really shed some light on great info – I enjoyed. Thanks!