Republicans in Congress have generally defended
corporate welfare for
companies involved in the student loan business:
lenders that collect billions of dollars in federal
subsidies in return
for issuing government-backed loans that represent no real risk to the
companies themselves. But support for these wasteful subsidies is
waning in both parties, thanks to recent revelations showing just how
corrupt and costly the program has become.
Yesterday,
The Times published a front-page article by Sam Dillon that offered
chapter and verse on how the
Department of Education, which is supposed
to oversee the lenders, was virtually taken over by the companies it
was supposed to regulate. The story focused on Jon Oberg, a department
researcher, who notified the government back in 2003 that the lenders
were improperly collecting hundreds of millions of dollars a year in
subsidy money.
Mr. Oberg told the
department that it could just shut off the subsidies by simply sending
the lenders a letter. But his bosses feigned ignorance and twiddled
their thumbs for three more years while the lenders grew fat off
billions that should have been going directly to needy students. Worse
still, one well-connected company was allowed to keep $278 million in
subsidies after the department''s inspector general found them improper.
The giveaway at the Education Department
is closely related to the payoffs and kickbacks that lenders have
recently been found to be paying to colleges that steer borrowers their
way. These schemes are driven by excess money that would substantially
dry up if Congress cut the subsidy rate. Beyond that, however, Congress
needs to get out of the business of artificially setting the subsidy
rate, as it does now. It could do that, and drive down costs, by
forcing lenders to compete for the right to participate in the loan
program at all.
Under another proposal,
Congress would phase out the subsidized loan program and send students
toward the less costly direct-loan program, under which they borrow
directly from the government. That, too, would be an improvement over
the current dismal situation. It is not so common that big problems
have such easy and obvious solutions. There is no excuse for inaction
in Congress.