Last week, U.S. Secretary of Education Arne Duncan had an op-ed in the Wall Street Journal declaring that it’s time to end the Federal Family Education Loan program (FFEL) which subsidizes banks and insulates them against almost all lending risk. Duncan wants to eliminate the “middle man” and have the vast majority of student loans come directly from Uncle Sam, a goal central to the Student Aid and Fiscal Responsibility Act (SAFRA).
Incongruously, after ripping the poor middle people, Duncan explains that they should actually stay firmly attached to federal funds as loan servicers. He then goes on to applaud as an incredible money-saver going to all direct lending.
Fortunately, several astute readers – as well as yours truly – saw right through Duncan’s heap of contradictions and dissembling, and the WSJ has printed numerous letters speaking the truth about student lending and SAFRA.
The Pope Center’s George Leef – who has done great higher-education work with Cato – leads things off with a letter pointing out all the perverse incentives and painful unintended consequences emanating from federal student aid. I bookend that by attacking the most aggravating of all SAFRA-related lies: that the bill would provide $10 billion for deficit reduction. Read any CBO estimate for SAFRA and you’ll see that that is just a bald-faced lie.
Of course, if they didn’t have lies, our student-lending overlords wouldn’t have much to say at all. Which is one of many reasons that the feds should get out of education – including student aid – altogether.