Sen. Lamar Alexander (R., Tenn.), the U.S. secretary of education from 1991 to 1993, tells National Review Online that President Obama’s revamping of the federal student-loan program is “truly brazen” and the “most underreported big-Washington takeover in history.”
“As Americans find out what it really does, they’ll be really unhappy,” Alexander predicts. “The first really unhappy people will be the 19 million students who, after July 1, will have no choice but to go to federal call centers to get their student loans. They’ll become even unhappier when they find out that the government is charging 2.8 percent to borrow the money and 6.8 percent to lend it to the students, and spending the difference on the new health-care bill and other programs. In other words, the government will be overcharging 19 million students.” The overcharge is “significant,” Alexander adds, because “on a $25,000 student loan, which is an average loan, the amount the government will overcharge will average between $1,700 and $1,800.”
“Up to now, 15 out of 19 million student loans were private loans, backed by the government,” Alexander says. “Now we’re going to borrow half-a-trillion from China to pay for billions in new loans. Not only will this add to the debt, but in the middle of a recession, this will throw 31,000 Americans working at community banks and non-profit lenders out of work.”
Alexander, a former University of Tennessee president, says the effects of Obama’s policy could be felt for decades. “When I was education secretary, one of my major objections to turning it all over to the government was that I didn’t think the government could manage it,” he says. “This is going to be too big and too congested, and makes getting your student loan about as attractive as lining up to get your driver’s license in some states.”
“It changes the kind of country we live in more than it changes American education,” Alexander concludes. “The American system of higher education has become the best in the world because of choice and competition. Unlike K-12, we give money to students and let them choose among schools, having the choice of private lenders or government lenders. That’s been the case for 20 years. Having no choice, and the government running it all, looks more like a Soviet-style, European, and even Asian higher-education model where the government manages everything. In most of those countries, they’ve been falling over themselves to reject their state-controlled authoritarian universities, which are much worse than ours, and move toward the American model which emphasizes choice, competition, and peer-reviewed research. In that sense, we’re now stepping back from our choice-competition culture, which has given us not just some of the best universities in the world, but almost all of them.”
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