What Do Students Think About Student Loan Reform?

As I was listening earlier today to the Sallie Mae Straight Talk call (I will post highlights later), amid the talk of CBO scores and parliamentary procedures, I was struck by a question that hasn't been asked much in the protracted debate over student loan reform.  What do the students (the customers) think? 

So, straight from the editorial pages of college newspapers from coast to coast are their thoughts: 

• The Maine Campus (University of Maine):  "We applaud the representatives who passed what amounts to the largest higher education aid reform bill of our lives. We hope the Senate follows suit."

• The Daily Cardinal (Stanford University):  "The bill will help students graduate with less debt while saving taxpayers money. Such action is wise and long overdue."

• The Lariat online (Baylor University):   "Though the opposition may see this as just another area overtaken by the federal government that may lead to job loss through the industry or a burden on universities during the transition out of their respective federal lending programs, it is a risk and a burden well worth shouldering."

• Daily Pennsylvanian (University of Pennsylvania):  "Private lenders have shown that they are more trouble than they are worth, and redirecting the savings into expanding grants to students is an excellent, efficient redistribution of resources. We hope the House passes this bill."

• Georgetown Voice (Georgetown University):  "It is essential that the Senate passes this bill. As Hoyas who claim to strive for a diverse community, we must lend our support to initiatives like this, which are crucial to enabling people from every background to come here."

• The Daily Reveille (LSU):  "It’s finally time for banks to get their hands out of private education... Banks should not be in the business of profiting off the loans of students seeking the critical skills needed to compete in a global economy.  Higher education deserves better. Our nation’s undergraduates deserve every chance to succeed in America, and thus to make America succeed with them."

• Indiana Daily Student (University of Indiana):  "This bill decreases government bureaucracy, increases efficiency, wastes fewer taxpayer dollars and stops payouts to financial institutions for doing absolutely nothing but shifting their losses onto taxpayers.
  What’s not to love?"

I searched in vain for opposing viewpoints.  It is somewhat curious that if you Google  "students who support FFELP" you will get the following message: 

No results found for "students who support FFELP"

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Update (10/13/2009):  Thanks to The Quick and The Ed for finding a student willing to publicly state their support for FFELP (A Lone Student Voice Publicly Opposed to SAFRA). 

Comments

[Bizzaro Watchdog]

The fact that there are no search results for "students who support FFELP" is dispositive that the Obama Administration and this Congress have done the right thing by students here in bulldozing FFELP. Everybody loves a free lunch! That is, until they have to pay for it! And oh yes, pay for it they will--becasue there are no free lunches!

In a few years, let's Google: "young people who enjoy paying higher taxes"! Or how about: "young people who enjoy less economic opportunity b/c of Washington greed and stupidity"! I doubt we'll find many "taxpayers who support the IRS" out there too eh Tim?

[Tim Ranzetta]

I am agnostic as to the outcome of the debate. My point with the post was to highlight the fact that the value-added services such as financial literacy and default prevention programs that lenders see as their competitive advantage over DL do not seem to be resonating with students (at least based on these campus editorials). I was hoping the post might bring to the fore, examples of student organizations in support of FFELP or perhaps theories on why they haven't been very active in this debate.

Tim

[Neville]

Tim, I don't mean to sound condescending but I think that most vocal young American adults are reactionary and selfish. Having been a reactionary selfish college student myself I remember exactly what it was like. Me and my peers would frequently lament that every part of higher learning (escpecially lenders) were out to rip us off. And any penny that was granted from the government or university was well deserved because it was a righteous confiscation of money from some filthy rich guy who just stole it from the public trust. As long as someone had a good story about a villain who was interfering with my subsidy, I was on board, as I think most students are today, despite the facts, despite the outcome.

[Bizzaro Watchdog]

Pardon me Tim, but I'd think twice about the value of the opinion of these campus editorials with regards to representing student attitudes about FFELP. As we've seen in our mainstream news outlets, papers and broadcasters these days tend to align themselves according to a particular political viewpoint. I don't go to the Wall Street Journal editorial pages to read about how wonderful the Direct Loan program is. Nor do I read the New York Times editorial page with the anticipation that it will sing the praises of FFELP. I suspect that campus editorials wouldn't be a good place to read about the cons of President Obama's health-care plan (for instance).

[FinAid Administrator]

The point is, students are in favor of the Obama plan because it shifts funds to students. Just like lenders are in favor of FFELP because money stays with the lenders. The question is, do taxpayers want their money given to lenders to ensure their continued participation and profits in FFELP or do they want their money to help students afford college and improve the educational outcomes of our country? Hands down students and taxpayers (when given full information) will overwhelmingly choose to help students instead of lenders.

[Bizzaro Watchdog]

I didn't realize spending endless billions on education was associated with improving the educational outcomes of our country? Ever hear of the law of diminishing marginal returns? Of course not--you work for a school. Whom, I might add, are the ultimate beneficiaries of Obama's FFELP largesse--not students. Let's not confuse that little tidbit shall we? You're neck deep in in it too FinAid Administrator--to deny it is beneath contempt! And since the last time I checked, schools still allocate seats based on price--giving selected potential students more purchasing power just increases the bidding war (price) for those seats. The "new money" will be burned on tuition inflation in a New York minute! Hence, why I mentioned earlier the stupidity of Washington. So, let's hear how students benefit again?

[Evie]

Yes, students are clearly biased and selfish for preferring that federal money go towards educational grants instead of padding loan company profits. So?

[Bizzaro Watchdog]

Well said Evie. You represent the new American paradigm warned of so many years ago by Ben Franklin: "When the people discover they can vote themselves money, that will herald the end of the republic." Let's see how this new paradigm works in the real world. How much economic opportunity and freedom will the masses enjoy with an all-powerful Washington at the helm? (Hint: not much!)

[Craigie]

"When the people discover they can vote themselves money, that will herald the end of the republic."

Yes, the banks, guaranty agencies, not-for-profit FFELP companies, etc., all discovered that maxim long ago! Today lobbying is called the essence of the republic. Most politicians now say that regulating campaign donations is tantamount to limiting corporate free speech. Go figure.

A corollary maxim is, once the states discover that they can shift their burdens to the national government, then that will herald the end of federalism. It happened with the state hospitals when SSDI/SSI was enacted, and it also happened with GSLs (now called FFELP), and the Congress was only too happy to oblige, from the mid-1970s onward.

DL provides better (and more) financial literacy, borrower counseling, default prevention, and so on. Surprised? That is because you have been repeating the same pr materials unquestioningly without checking what is behind it.

[Bizzaro Watchdog]

Yes indeed Craigie--the government always runs things more efficiently than the private sector! We have the Post Office, Amtrak, Medicare, Fannie/Freddie, FHA, and the public school system to speak to that point. That's why we also have the maxim "good enough for government work" right Craigie? But the Direct Loan vs. FFELP battle is only the opening salvo in the larger war to make college "free" for everyone--the lowest-common-denominator maxim!

"Equal pay for equal work"--that's what the children were singing the other day in praise of Obama! Aristotle said the "worst form of inequality is to try to make unequal things equal." Ever wonder why housing is so expensive in this country? Health care? College? You think it is mere coincidence that all three of these sectors of our economy also have large amounts of federal assistance thrown at them attempting to make the unequal equal?

You and your ilk Craigie, have no respect for the laws of economics. You think government fiat can somehow magically make right all the wrongs in the world. It’s a lie. And those who peddle the lie are snake-oil salesmen. The price of the egalitarian society is less freedom, and correspondingly, less innovation.

[Craigie]

You and your ilk have no respect for the laws of economics. You are a "watchdog" only for those feeding at the trough of the taxpayer. DL vs. FFEL is not a govt vs. private sector situation, but, if it were, FFEL would be govt and DL would be the private sector. FFEL is an old "Great Society" govt program set up before the days when computers were widespread and subsidy checks were issued willy nilly from Washington with only a hope for the best that widespread waste would not occur. With the past two years of the feds providing most of the liquidity for new FFEL volume (according to this blog at least), the FFEL train has already left the station. Despite the "liberals" calling this year's student loan reform discussion a "fight against the banks," the strongest players in FFEL politically are the state agency lenders, not-for-profit lenders, and guaranty agencies (which are a mix of state agencies and not-for-profit entities). This power has enabled state lenders, despite their small market share, to garner a disproportionate share of Washington's largesse. Hardly a free-market nirvana. And what makes both the banks and state lenders upset about DL is that the contracts have been issued competitively, thus, "FFEL jobs are at risk," because not everyone currently in FFEL will automatically get a contract. They will actually have to compete for the first time in decades. That is the free market; it is widely accepted in the military and other sectors. And don't take my word for it; the FFEL people are on record as opposing any minor movement towards market-based subsidy, for example, interest rate bidding or auction pilot programs. Any time of movement away from central Congressional planning of FFEL has been vociferously opposed by those who speak for the FFEL participants. One would hope that the grass roots are more free-market in nature.

As far as the post office -- it is not part of the government (since 1970) yet has been pressured politically to operate uneconomically -- post offices in tiny, tiny communities, as well as "rural free delivery," which Fed Ex and UPS would never provide. If USPS were permitted, without Congressional interference, to operate customer service facilities only in communities of more than 100,000 people, then imagine how much could be saved! The same small-state Senators who complain about USPS "losing money" and elbowing out Fedex/UPS will be complaining when their states have zero post offices, and rural folks are charged for the privilege of delivery to the boonies.

Amtrak is another one where trimming back to the heavily used routes could result in substantial savings, even profits, but the powers that be in Congress would never allow it. In addition, transportation has NEVER been a money-maker. Those who look back at the golden days of 1880s railroad are forgetting all the free land the govt gave to the railroads. You could go back even further to the monopoly charters granted by govt to ferries and tugs. Taxpayer subsidy and transportation have been hand-in-hand since day one.

Medicare has far lower administrative costs than seen in the health insurance companies. Critics say this is because Medicare's customer base is relatively homogenous -- the elderly and the disabled. That doesn't change the facts, though. Fannie/Freddie until last year were private-sector, publicly-traded corporations which contained a relatively tiny "public mission" of increasing access to single family homes, something that both political parties have supported since WW II. Investors mistakenly assumed that Fannie/Freddie had an implicit govt guaranty, and the Bush Administration arguably made a significant error in decided these entities were "too big to fail."

The simple truth that people keep forgetting is that when your local bank issues a loan, that's not a "loss" or a "deficit" for the bank. It is an asset. The same with DL. Those loans are assets. Some are more high-risk than others, just like in a bank. But, to say that new students at, for example, Cal Tech, will be more likely to default after 2010 than they are now, simply because the loan delivery system may change, would seem to be greatly exaggerating the importance of the delivery system.

Two of the main reasons housing is so expensive: (1) NIMBY. This is equally supported by conservatives and liberals. They call it "protecting our community." 1-acre zoning, 2-acre zoning, whatever. It is more objectively called exclusionary zoning. (2) Mortgage interest deduction. When the 1986 tax reform/simplification bill was working its way through Congress, it was realtors and developers who blocked the elimination of this deduction. Most deductions and tax credits were eliminated by this simplification effort. This one was not. Realtors and developers know that consumers are willing to pay more due to that deduction.

FFEL/DL is not about increasing or reducing the cost of college. A financial aid system could be developed which would constrain the ability of colleges to increase consumer costs. Such a system could include a loan program, which in turn could be either DL or FFEL or something totally new. Right now neither FFEL nor DL is set up as part of such an approach. For example, what if colleges had to stake the equivalent of 10% of all new loan volume they wished to originate. The institutional contribution approach has constrained growth in the campus-based programs, so why not extend that to the main loan program? Some colleges will say they can't afford it? Then aren't they simply in business to funnel student loan disbursements rather than provide an education?

[Neville]

Craigie, your examples make a substantial point(except for housing - it's highly speculative nature inflates prices). But your point being; in order to maintain a status quo, the government subsidizes programs that are no longer viable. And in doing so bolster's it's own position, in that more of society becomes reliant on the government.

DL, FFEL, "who's more effective at giving away money?" is a mute point. What's needed is the tough work of reforming gold-plated secondary educations, but it's easier for the fed to make a power grab and absorb a subsidized private industry (When did the gov't become a for profit industry? ...but I digress).

This sets the precedent for an arguement to be made for the government ending all private banking. I mean "why not?" The Treasury can borrow China's money cheaper than anybody. Like you said, loans are assets, they don't negatively impact the balance sheet, right? Oh, I forgot about TARP. And adding all those student loans to the national debt won't have an adverse impact...execpt for the fact that student loans are the bankable equivalent of a sub-prime mortgage, since students have no income, no assets, no collateral. And since the CBO keeps revising down SAFRA savings from $87B, to $47B, to $30B, just like every other over-budget bloated gov't program, there will be no savings, only costs to the tax payers.

[frederick covey]

Good to see the Qorvis "grass roots" effort is having no effect. Could be the lack of Credibility. With Rene Drouin as one of the three cited as representatives of the "protect student choice" sham grass roots efforts might be having an effect. Mr. Drouin's credibility and "fake degrees" (not my words, but CBS news words) might be having something to do with it.

In the CBS News report Below - Mr. Drouin is cited as one of many Education "professionals" with "fake degrees." Schools Mr. Drouin lists as his "alma mater" have been shut down by state or federal authorities for being unaccredited diploma mills. (Mr. Drouin also claims a law degree from Drexel - the reputable Drexel Univeristy in PA does NOT offer a law degree; however, the Drexel diploma mill in Louisiana that was shut down by Federal Authorities did offer a law degree)

http://www.cbsnews.com/stories/2004/05/10/eveningnews/main616664.shtml

Mr. Drouin's is also a subject of scrutiny for his pay being so high despite the NHHEAF (a "non-profit" organization) being a tiny player among the student loan middlemen.

http://www.newamerica.net/blog/higher-ed-watch/2009/guaranty-agency-compensation-12515

Recently, Mr. Drouin has joined with two other lenders to drive an effort to derail this much needed reform of a scandal ridden process. Mr. Drouin is listed as one of three principals driving ""Protect Student Choice" - a supposed grass roots effort managed by PR firm Qorvis. You might remember Qorvis as the organization raided by the FBI in 2005. One of the loan agencies was kind enough to post the Qorvis presentation and strategy powerpoint up for all to see:

http://www.youtube.com/watch?v=rB01NFJCV08