BOSTON (Associated Press) Sept 17, 2010
Citigroup Inc. is exiting the private student loan business, as the government changes the playing field by making Uncle Sam the primary lender to students.
The government’s growing role is cutting out private lenders from much of the business of financing higher education, prompting lenders to decide whether to exit the business entirely or scale back.
Citibank is just the first of the major private sector lenders who will be leaving the student loan business. It is the fruit of Obama’s plan to increase government control over colleges and universities by controlling the purse strings.
Wall St Journal, Sept 12, 2009
The Obama plan calls for the U.S. Department of Education to move from its current 20% share of the student-loan origination market to 80% on July 1, 2010, when private lenders will be barred from making government-guaranteed loans. The remaining 20% of the market that is now completely private will likely shrink further as lenders try to comply with regulations Congress created last year. Starting next summer, taxpayers will have to put up roughly $100 billion per year to lend to students.
If the feds are now making and owning all such loans, expect default rates to soar. When the government hires contractors to collect on its loans, it pays them for simply calling the borrower, regardless of the result. Private lenders, on the other hand, make money from a performing loan and have a greater incentive to do careful underwriting and aggressive collection.
Default rate by students of Hillsdale College, which accepts no government loan students, is under 2%. The current default rate by students in the government loan program is over 30%.
Wall St Journal again,
[P]arents will soon have no choice beyond a Washington bureaucracy to borrow money for their college-bound children, and taxpayers will pay a fortune for the privilege.
They will have Hillsdale College and possibly no other.
You will remember how difficult it was to find out what was included in the health care bill. There was one excuse after another. The weakest was it was too long and to complex to be understood. It was said to be 3,000, 2, 000, 1,800 and 2,500 pages long. Nancy Pelosi said we will not know what is in it until it becomes law. She was right about that.
Obama had promised pending bills would be published on the Internet for public review if he were elected. He promised, no more secrecy, debates will be open and broadcast on CSPAN. But there was no timely posting of the health care bill and Obama denied CSPAN access to debates. When John McCain sought openness as promised, the President replied with a ridiculing laugh, “That was the campaign, John. The campaign is over.” The gall of the man!
What were they trying to hide? For one thing, the government’s shutting of private lenders out of the business of making student loans. I hear a question coming from some naïve soul in the corner, what do student loans have to do with health care?
Wall St Journal, Mar 25, 2010
This plan is hitched to ObamaCare for several reasons. For one, the student-loan takeover could never attract a filibuster-proof 60 votes if it had to pass as a stand-alone measure, and it might not even get 51. The government’s bogus accounting for student loans also creates the illusion that this bill will help save enough money in the first five years to protect the ObamaCare provisions from Republican challenges under budget rules. Remember, budget reconciliation is supposed to be about preventing deficits, so it takes a mother lode of accounting gimmicks to claim that the bill’s spending binge is a cost-saver.
Does that answer your question, sir? It is the way Washington works, and it is time we change it. Remember, vote in November.