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December 7th, 2009 12:59 pm
Student Loan Policies Offer Case Study for Health Care Reform

With all the attention devoted to health care reform this fall it is little wonder that the federalization of the college student loan system is getting scant notice. As the Wall Street Journal points out, there is a quiet takeover occurring of the student loan market that, if successful, would eliminate private lending companies from competing with the federal government’s alternative.

The typical tale of a free-speech controversy on campus involves administrators landing on some poor undergrad who violates political correctness. But in this story the administrators have been afraid to speak as the Department of Education pressured them to drop private lenders and embrace the department’s own Direct Lending (DL) program. The pending bill, which has passed the House but is stalled in the Senate, would ban private lenders from making federally guaranteed loans after July 1, 2010.

Congress has already enacted regulations in recent years to discourage making loans without a federal guarantee. And many lenders have quit the business. Now the White House and Democrats like California Rep. George Miller want to go further and convert students from private loans largely backed by the taxpayer into government loans made and serviced by government and backed by the taxpayer. Think of this as a prelude to how Congress will rig the rules for any public option in health care.

Sound familiar? It gets worse. Even though the bill requiring a private loan be backed by a federal guarantee is not yet law, the Department of Education (DOE) is already contacting schools to make sure they are in compliance. Thankfully, there is still time to contact your senator while the upper chamber considers amending the House bill to allow private lenders to stay in business. If nothing else, tell them you support the free market, because it’s the only thing supporting Congress’ spending addiction.

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