Tag: SAFRA

The Other Federal Takeover

Right now the nation is fixated on the Supreme Court and health care, as well it should be. If the Court rules the wrong way and the individual mandate is upheld, seemingly the last limit to federal power—Washington can’t make you buy stuff—will be gone. So yes, please, let’s focus on ObamaCare.

When the arguments end and the health fight abates for a while, however, let’s pay some much needed attention to another federal takeover, one that is constantly being overshadowed by bigger things like wars, ObamaCare, and budget blowouts: looming federal domination of education.

There’s actually an immediate ObamaCare connection to education, though few will likely recall it. To make the CBO cost estimates come out right, Democrats attached the Student Aid and Fiscal Responsibility Act (SAFRA) to the already immense legislation. SAFRA eliminated guaranteed college loans—loans originated through private lenders but completely backed by taxpayer money—and made almost all lending direct from the Treasury. It wasn’t a sudden takeover as many Republicans framed it—the guaranteed program already represented massive federal control—but it did push the private sector even farther to the student-lending fringes.

Much more insidious is what Washington has been doing in K-12 schooling.

The real sea change was No Child Left Behind, when the Feds went from primarily doling out money, to dictating that every state have standards and tests in math, reading, and science, and schools and districts make yearly “proficiency” progress. It was a huge ramping-up of already unconstitutional federal involvement.

At least NCLB, though, was enacted through the proper legislative process: Congress debated the law, voted on it, and the president signed it. These days, that’s just too much of a bother.

The Obama administration started unilaterally making education policy with the “Race to the Top,” a contest in which states competed for $4 billion in “stimulus” money. Among the administration-specified things states essentially had to adopt to win? National curriculum standards, better known as the “Common Core,” which we are told repeatedly are voluntary for states to adopt.

But wait. Didn’t I used to write that Race to the Top was $4.35 billion? What happened to the other $350 million?

It wasn’t part of the purse states competed for. Instead, the administration is using it to pay for the development of national (read: “federal”) tests to go with the Common Core.

In case all that weren’t enough, the Obama Administration has decided it’s tired of waiting for Congress to rework NCLB and is issuing waivers to states that promise to implement administration-approved reforms. Included in those is adopting “college- and career-ready” standards, a euphemism for the Common Core. In other words, the federal government is on the precipice of dictating the basic curriculum for every public school in America, and doing so without even the semblance of following the constitutional, legislative process. It’s not just a federal takeover, but an executive branch takeover.

Why hasn’t this gotten the sort of attention that’s been showered on health care?

Unfortunately, a large part of the problem is that people are simply accustomed to a government education monopoly. Historically such a monopoly hasn’t been the norm, but in our lifetimes it has, and government schooling advocates would have us believe that it is the cornerstone of our society. Not so with health care: lots of people want others to pay for their care, but the default has never been government assigning you a doctor and hospital based exclusively on your home address.

The other part of the problem is people simply don’t know about the federal edu-coup. This is especially the case with national standards, which advocates have purposely soft pedaled to avoid the fate of open and honest—but disastrous—federal standards efforts in the 1990s. And when the topic has come up in public discussion, classic propaganda techniques have been employed: repeat enough that the effort is completely “state-led and voluntary,” and people will believe you.

Thankfully, it’s not too late to reverse this. There’s no historic Supreme Court showdown on the horizon, but some states have started to resist federal control, and groups like the Pioneer Institute and Pacific Research Institute have undertaken concerted efforts to expose the Common Core. The biggest problem is that the public is largely oblivious to what’s going on. Which is why, after the ObamaCare Supreme Court arguments are over, we need to turn our attention to the other, almost complete, federal takeover: education.

While You Were Watching the Economy, Health Care, Wars…

…the federal government was taking over education. At least, it was moving a lot further in that direction, with Secretary of Education Arne Duncan wielding billions of “stimulus” dollars to coerce states to do Washington’s bidding. And that’s not just my take. It’s also the New York Times’:

Mr. Duncan is a man in a hurry. He has far more money to dole out than any previous secretary of education, and he is using it in ways that extend the federal government’s reach into virtually every area of education, from pre-kindergarten to college.

Race to the Top. SAFRA. National standards. For well over a year, we at the Center for Educational Freedom have issued warnings about all of these escalations of utterly unconstitutional federal power in education, but it has been nearly impossible to cut through all of the huge, non-education stories to get much notice.

Unfortunately, the hits just keep on coming. While the nation is fixated on oil in the Gulf of Mexico and the supposed evils of Wall Street, the administration continues to change the constantly moving target that is the Race to the Top program, now essentially offering individual districts in California a chance to compete in RTTT round two. This despite states explicitly being identified as THE competitors in the current RTTT. It almost makes you conclude that you just can’t trust anything you’re told about RTTT by the administration, and that there is no good reason for any state to expect a fair race.

Thankfully, there is some good news to report. According to the Times, the ever-expansive Department of Education is now about as popular as the tax man – but not quite:

A new survey by the Pew Research Center found distrust of government at its highest level in 30 years. Of all federal agencies, the department of education’s approval rating had fallen most sharply, to 40 percent from 61 percent in 1998. In fact, the department got the lowest rating of any federal agency, including the Internal Revenue Service.

And that is with ED operating largely under the radar. Imagine if people actually knew what Duncan and company were doing!

Higher Education Subsidies

A battle over higher education loans is coming to a head as Democrats consider including the ill-titled Student Aid and Fiscal Responsibility Act in reconciliation legislation. In one corner, we have private education loan lenders who enjoy the generous subsidies and loan guarantees provided by Uncle Sam. In the other, we have policymakers who want to cut out the middleman by having the Department of Education provide direct loans.

Critics of SAFRA correctly point out that the alleged savings of nationalizing student loan subsidies are a sham. The Congressional Budget Office has scored the nationalizing portion of the bill as saving $67 billion over ten years. However, in a letter to Sen. Judd Gregg (R-NH), the CBO acknowledged that when the cost of default risk is factored in, the alleged savings drop by $33 billion. Yet, taxpayers won’t realize any savings because the legislation adds $80 billion in additional spending for Pell grants and other programs.

For taxpayers, the unpalatable choice is nationalization or crony capitalism—subsidizing private businesses. The real answer is for the federal government to get out of the higher education subsidy business altogether, as a Cato essay argues.

The following are some key points from the essay:

  • The effect of subsidy programs, in part, is to impose taxes on blue collar workers—who have not attended college—to pay for the tuition of future white-collar professionals. Why should the government subsidize future high earners at the expense of average working people?
  • Federal student aid programs transfer wealth from taxpayers to academic institutions. That’s because the rise in student subsidies over the decades appears to have fueled inflation in education costs. Tuition and other college costs have soared as subsidies have risen. College cost inflation induced by federal aid probably hurts low-income families—the people that federal aid was supposed to target—more than others.
  • Federal aid has probably helped increase student enrollment, but many of those additional students may not have been ready, or suited, for college. This is evidenced by the rising shares of college students who require remedial work, and the fact that institutions have lowered their standards to adapt to the rise in second-rate students.
  • Increasing top-down control and subsidization of higher education from Washington is creating a threat to the strength of the American system. As we have seen in K-12 education, the growth in federal subsidies is usually accompanied by calls for more oversight, micromanagement, and rising levels of red tape imposed by Washington.
  • Federal student loan and grant programs have been subject to waste and fraud for decades. The Pell grant program (which SAFRA would enlarge) costs taxpayers hundreds of millions of dollars per year in fraud. Another ongoing problem is the high default rate on student loan programs.

If There’s Money, We Want It! (Whatever “It” Is.)

There seems to be a real trend in Washington to declare support for a bill now, but actually have the bill exist later. It’s been most obvious in the health care marathon, where often purely notional pieces of legislation have been boisterously celebrated or bemoaned for months. It’s also the case with the Student Aid and Fiscal Responsibility Act, which may or may not be tacked on to health-care reconcilation because supporters don’t, you know, want to actually debate the thing. Currently, there is no Senate version of SAFRA, and it’s unclear what changes would need to be made to the House version to make it reconcilable.

So why are so many people willing to take big chances on legislation that only exists in the fertile minds of congresspeople? As this Inside Higher Ed article on community colleges illustrates, it’s often because they want taxpayer money – $12 billion is the community colleges’ hoped for windfall – no matter what:

Sensing the urgency of the moment on Capitol Hill, many community college advocates believe that budget reconciliation is the most likely route for passage of the AGI this year. They argue that time is of the essence for those community college trustees and presidents visiting town for the summit to lobby their representatives and senators without focusing on quibbles over the bill.

“I know there’s a lot of discussion for many of you [about] what’s in the program,” said Jee Hang Lee, ACCT director of public policy. “‘What’s in the final program for SAFRA? What’s in the final program for AGI? What is it going to look like?’ What we’ve heard is that, for the most part, the House and Senate staffs and the White House have something in place. I don’t know what it looks like. I don’t know many people who do know what it looks like. But they have a broad agreement on the structure of these programs, so that’s nice to know that they have because that means it’ll likely get funded.”

Still, he advised visiting trustees and presidents to be direct in their support for the bill and wait until later to work out potential kinks in its specific provisions.

“My point is that you just need to press hard to get this money and get it passed, and we can work out some of the details, I guess, later, I guess through the negotiated rule-making period,” Lee said.

Hmm. And I guess money grabs like these explain a good bit of why the national debt is now approaching $12.6 trillion.

Sneaky SAFRA

Great column on the Student Aid and Fiscal Responsibility Act by Tim Carney in today’s Washington Examiner. He hits the major points — SAFRA hardly threatens a sudden federal takeover of student lending, but also promises anything but “fiscal reponsibility” — while adding a critical warning: the whole stinkin’ bill could be tacked onto health care reconciliation.

Wow! As if the health care bill isn’t abominable enough on its own…

Duncan Dunked in WSJ

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.

Taxpayers, Anyone? And How About Tuition Inflation?

The Student Aid and Fiscal Responsiblilty Act will probably be approved by the House of Representatives today, and to push it along the bill’s sponsor, Rep. George Miller (D-CA), makes clear for whom he is working:

Let’s remember whose voices really matter here. It’s time to listen to our students and our families.

First of all, do the voices of taxpayers not matter at all? You know, the folks who are going to foot the bill for all this largesse? Oh yeah – concentrated benefits, diffuse costs. And have students and their families really been trees falling in the wilderness with no one to hear them? With inflation-adjusted aid per full-time-equivalent student (table 3) rising from $4,454 in 1987 to $10,392 in 2007 – a 134 percent increase – it sure doesn’t seem so.

In fairness, the bill’s proponents have paid lip service to taxpayers, saying with straight and utterly deceptive faces that SAFRA won’t cost taxpayers a dime. The thing is, not only is this totally unsupportable according to several Congressional Budget Office analyses, it completely ingores that tax money is covering all of the costs of the bill. SAFRA would simply transfer taxpayer ducats from backing ostensibly private loans to loans directly from Washington, as well as lots of other federal expenditures.

And then there’s this: SAFRA supporters can talk all they want about helping students and families, but increasing grants and loans ultimately just hurts college-goers. Why? Because colleges and universities raise their prices to capture every additional penny of aid, as basic economics makes clear they would. So the only people politicians are ultimately helping are colleges, and by appearing to care ever so much about likely voters, themselves.