Thursday, March 25, 2010

The federal government taking on student loans

The WSJ explains what is so odious about attaching the federal takeover of student loans to the health care bill. It wouldn't have passed on its own so they needed to add it in to the reconciliation package. This is just the start of pushing bills that couldn't withstand a filibuster through in reconciliation. Don't be surprised to see this happen with other bills such as amnesty and cap and trade.

Plus there is the deception that they can take the money supposedly saved from taking over the federal loan program can be used to reduce the cost of their new entitlement. Thus, they can get around the requirement that the bill reduces the budget.

But the reason that the bill wouldn't pass on its own without using reconciliation is because it is yet another example of the federal government taking over a for-profit industry under the pretense that the federal government can do it better.
Part of this reconciliation fairy tale is that cutting out the private-lender middlemen will save billions every year as students borrow directly from the feds. But while Democrats are eliminating a revenue stream at for-profit companies, they are simultaneously creating another one for a handful of favored nonprofit companies.

Currently, for loans that the government makes directly to students, the Department of Education conducts competitive bidding and hires private companies to service the loans. But in the pending bill, several dozen nonprofit firms will be eligible to receive no-bid servicing contracts on up to 100,000 student accounts for each firm.
So which nonprofits are going to get this bonanza? Ones that the Democrats like.
California's ALL Student Loan looks to be a big winner, thanks to language written by Representative George Miller of California. ALL Student Loan may have helped its cause by retaining the services of Vincent Reusing, a lobbyist whom the Chronicle of Higher Education has described as a "personal friend" of Mr. Miller.

"The person that any lender chooses to be their lobbyist is irrelevant to Chairman Miller," says Rachel Racusen, a spokesman for Mr. Miller. She adds, "Under this legislation, nonprofit lenders will be required to meet the same high-quality servicing standards as for-profit lenders, including measures of borrower satisfaction."

To be fair to Mr. Miller, his track record suggests that he favors assaults on profit-making businesses whether or not his friends are lobbying him. It's also true that Mr. Reusing has been very friendly to more than one left-leaning politician over the years. According to OpenSecrets.org, Mr. Reusing has contributed more than $80,000 to various Democratic campaigns, including Mr. Miller's.

The nonprofit companies set to benefit from this reconciliation earmark clearly enjoy broad support in the Democratic caucus. And you thought Democrats didn't like business.
It's all very convenient. And who knows what other private businesses the Democrats will be looking around to see if they can take them over.

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