Opinion: Editorial

Risky Business

There are few good ideas crafted by politicians. It’s even more rare that those ideas are made into law.

For instance, take the legislation running through congress to reform student loans. The current system has private lenders handling student loans, while the federal government assumes nearly all default risk. The Student Aid and Fiscal Responsibility Act would finally give the government direct control over federal student loans, cutting out the private lenders that currently serve as the government’s middlemen.

Non-partisan analysis of the bill estimates it would save around $61 billion over the next decade. Most of that money would be used to fund more Pell Grants, which, except for a provision in the stimulus bill, have seen few boosts in funding and could certainly use the increase.

Members of the Associated Students of Madison traveled to Washington, D.C. to fight for this legislation and promoted the bill to Sens. Herb Kohl, D-Wis.; Roland Burris, D-Ill.; and Dick Durbin, D-Ill.

This action was a nice bit of advocacy on behalf of the University of Wisconsin student government and we appreciate their lobbying on behalf of SAFRA, the federal work-study program and the initial steps of a Big Ten Governmental Affairs Committee meeting to be held annually.

But for all that ASM has done to this end, lobbyists working on behalf of students have undergone a rather boneheaded move. In an attempt to ensure passage of the bill, the United States Student Association successfully lobbied the U.S. House of Representatives to tack the SAFRA legislation onto the twitching turkey that is the health care reform bill. The move came as a result of opposition to the bill in the Senate by certain key democrats.

While we understand the urgency in passing this legislation, attaching this rather reasonable bill to one of the most high-stakes public overhauls in U.S. history that seems even less likely to pass than the SAFRA legislation seems needlessly risky. Perhaps the political will wasn’t there in the Senate, but it certainly wasn’t a foregone conclusion that the legislation was dead on arrival. Now its survival depends on the already convoluted, confusing and controversial health care bill.

Even if it does pass, it makes it necessary for students who support reinvestment in financial aid and higher education to root for something with which they may be very much at odds. While this board doesn’t plan on taking a stance on the health care bill, we recognize the public policy conflict inherent in this act of bundling.

So while we appreciate USSA trying to help move forward an important piece of higher education policy, tying student loan reform to the success of the health care bill is ill advised.

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2 older comments

“The current system has private lenders handling student loans, while the federal government assumes nearly all default risk.”

The federal government assumes the risk? Where do they get the money? It is the taxpayers that are forced to assume risk whether they want to or not, and this doesn’t change under the new rules.

“The Student Aid and Fiscal Responsibility Act would finally give the government direct control over federal student loans, cutting out the private lenders that currently serve as the government�s middlemen.”

The government is the middleman. It interjects itself between lenders and borrowers. It takes from potential lenders and redistributes it to borrowers. Cutting out the middlemen would mean allowing lenders and borrowers to trade directly, without government interjecting itself into the process.

Your understanding of the system is flawed Mr. Allard. Banks can still make “student” loans as they have; they simply cannot make the Stafford and Perkins loans. These low interest federal loans are 97% guaranteed by the government so that no matter what happens, the banks get paid. The ONLY thing this bill does is require that these two formerly subsidized programs be taken directly from the Department of Education instead of the banks. However, if you wish to take out a “student” loan from a private bank, the option is still there, along with the hefty interest rate.

Additionally, this part of the legislation is completely irrelevant to UW-Madison as our financial aid office adopted a policy of only direct loans earlier this year. So starting next fall, whether SAFRA passes or not, your Perkins and Stafford loans will be straight from the DoE.

Please contact me with any questions, or feel free to comment on my blog www.thecampusfirst.wordpress.com

Adam Johnson Chair of Legislative Affairs

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