14 April 2008

Why A Million Students Can't Afford College

Some mind-boggling stuff in Charles R. Morris' The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. (Life Hiker - I think that you in particular might find this a compelling read.) Just this (paraphrased) to chew on for now:

Not only is America the only country where most students graduate from college with heavy debt loads, but the subsidized student loan business is lucrative. SLM, the biggest student lender by far, pays its executives quite well. Their CEO's pay in 2003 was $12.7 million and by 2005 his options were worth $189 million.

How is it that subsidized lenders have so much money? Because this administration is so stubbornly wed to the idea of free markets that it will subsidize business at double the rate it would take to fund its similar government programs.

The government has a direct loan program. The costs within this program for each $100 loaned to students are about $4.50. By contrast, the subsidy costs to private lenders like SLM are $11 per $100. More than double.

Even so,
"appropriations for the direct program will limit its activity to just 23 percent of the total federal subsidy market, reserving the remaining 77 percent for the private lenders. If all loans were financed through the direct loan program, the savings would finance full tuition grants for another million students."

There is a huge difference between trusting in for-profit businesses more than you trust in government agencies on the one hand and flatly giving private businesses money from taxpayers. The Bush Administration seems to neither understand this difference or care.

6 comments:

ThomasLB said...

I've never understood why people trust for-profit businesses more than the government. Are stockholders inherently more good and honest than voters?

Lifehiker said...

O my god! A republican government subsidizing fat cats? It must be the first time!

I think I'm going to be sick.

Given this, can you imagine the savings if Medicare processed all health care? HMO's have proven to be disappointing.

Ron Davison said...

Thomas,
It must be faith, of a sorts, in the invisible hand.

LH,
Now you are just making fun of me; I only wish it were harder to do.

howtoaffordcollege said...

It is getting tougher and tougher to find good loans. Read the book "Cash For College" you can find a way to get it on my blog. The author is Daniel Wansten, he specializes in college funding and finacial aid. The book is really helpful for parents trying to send their children to the college of thier dreams and not go broke.

David said...

You're right, I'm against giving money to businesses from taxpayers as much as I'm against trusting government agencies to administer or manage anything well except possibly defense. I don't think it's about understanding or caring though (by the current administration), more about paying off contributors. BTW, try looking into congresses record on this issue. These practices will not end with Bush's departure.

Ron Davison said...

howtoafford ..
thanks for the tip.

David,
if only it were that simple ... "practices ending with Bush's departure." There is big money in big (government) money and it is hard to imagine that anyone will soon be weaned of it.