March 27, 2010 in Opinion

Republicans side with loan wolves

Froma Harrop
 

When the government hands money to poor people, that’s welfare, Republicans say. That’s taking money from productive taxpayers and encouraging dependency, they assert.

But when corporations get taxpayer handouts, that’s not welfare in the GOP book of rhetoric. Take away a company’s subsidy, and you have a “government takeover.” Such is the Republican stance on Democratic plans to remove the corporate middleman from the federal student-loan program, included in the recently passed House health care reform bill.

Since when did ending taxpayer subsidies become expropriation? Since Republicans stopped being principled conservatives and became corporate socialists. If the Republicans’ mission is to enrich their corporate donors by burdening taxpayers, they’re going about it the right way.

Sen. Lindsey Graham, a South Carolina Republican, complained on Fox News that if the Democrats’ student-loan plan passes, “what the federal government has done is dealt out the private sector.”

Darn straight, Senator. And may one ask why the private sector was “dealt” into a government program to begin with? The answer is easy: That’s what passes for conservatism these days. (For further reference, check out the 2003 Medicare drug benefit legislation, which Republicans made wildly expensive by cutting in the private insurers.)

There are currently two kinds of student loans. In one, the government lends directly to students. Democrats want the whole program to be like this. In the other, the government gives guarantees against bad loans and rising interest rates to private financial companies, who then lend the money to the students. Either way, taxpayers are on the hook.

Which means either way, it’s a government program. When Graham charges that Democrats are “giving the student-loan program completely to the federal government,” he is making zero sense – unless he believes that the banks have some entitlement that we weren’t told about.

Republicans (and a few Democratic accomplices) are defending a real sweet deal for Wall Street. The companies make fortunes off the student borrowers while the taxpayers protect them against their bad luck. This is another of those “privatized profits and socialized losses” schemes that enriches the financiers no matter what happens to the rest of us.

Do you know who would lose billions should they be “dealt out” of this government program? For starters, our bailout buddies at Citigroup, JPMorgan Chase and Bank of America. And, of course, there’s Sallie Mae, the student-loan giant.

Ahhh, Sallie Mae. This private company made so much dough off the program that in 2002 its then-CEO, Al Lord, ranked first in corporate compensation in the Washington, D.C., area, and another Sallie executive came in second. Having made a quarter-billion in 10 years, Lord bought 244 acres in suburban Washington to build his own personal 18-hole golf course. Not bad payback for working a government program.

But oh dear, by chopping subsidies to private lenders are we taking away consumer choice? It’s true that students would find it harder to obtain predatory loans. As reported in Fortune magazine, one Sallie customer’s $38,000 student loan had magically ballooned to $100,000 after the borrower lost a job. And some still in school found themselves paying Sallie interest at an astounding rate of 28 percent – on top of the exorbitant fees slipped into their loan agreement’s fine print.

Under the Democrats’ proposal, students would obtain loans directly from their college financial aid office. The students would pay a lower rate of interest and over a longer period. The taxpayers, meanwhile, would save $67 billion.

There’s little in this picture that a real conservative who believes in a student-loan program wouldn’t like. Odd how Democrats have to be both the liberals and the conservatives these days.

Froma Harrop is a columnist for the Providence Journal.

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