Jonathan Chait, in discussing the institutional problems that Obama faces in getting his agenda passed, describes Blue Dog Democratic Senator Ben Nelson's opposition to direct federal financing of student loans:
Recent years have shown beyond a doubt that the direct lending program works better. Every independent analysis--by the Congressional Budget Office, by the Office of Management and Budget under each of the last three presidents, and by the New America Foundation--has found that direct lending is cheaper. The guaranteed-loan program managed to cling to life through its congressional patrons and through simple graft. In 2007, a major student-loan scandal emerged when it turned out that private lenders paid off college administrators to drop out of the direct lending program and steer students to them.
Obama thus proposes to save the taxpayers more than $4 billion per year by ending the guaranteed loans. This is as straightforward a case as you can find of a fight between special interests and the public good. Nelson opposes it because one of the lenders that benefits from federal overpayments is based in Lincoln, Nebraska.
Some moderate Democrats seem to suffer from a conflation of their own fund-raising strategies with responsible fiscal policy. The Wall Street Journal reported, of a group of Democratic Senate centrists, "Their stated goal is to rein in deficits and to protect business interests." In fact, this is not a goal but two often-conflicting goals, and neither is synonymous with "the national interest." This sort of behavior didn't hurt Bush because his agenda largely was synonymous with business interests. But the Democratic agenda isn't, and Democratic confusion of the two is poisonous.
So if you're paying more for your student loans, feel free to thank Senator Nelson. It's about fiscal responsibility, after all...
"...Nelson opposes it because one of the lenders that benefits from federal overpayments is based in Lincoln, Nebraska"
If I had some facts to back up that assertion, I'd walk on over to Ben's Lincoln office and raise a rukus.
Jonathan Chait doesn't know what he's talking about.
I challenge him or anyone else to back up the claims made in support of eliminating a 44-year-old student aid program.
This is not about lenders making profits. If Obama gets his way, the government will be making a HUGE PROFIT--bigger than any lender ever did--off of borrowers.
How can I say that? Because no one is talking about recirculating the savings back into lower loan costs. The Administration is planning on overcharging students for the next ten years.
What are you talking about? The federal loan program has interest rates that are 2 percentage points lower than the private program. The costs are already lower.