Libertarian activist Richard Cornuelle founded United Student Aid Funds (USAF) in the late 1950s in response to incipient federal intervention in the student loan business. Cornuelle wanted to demonstrate the effectiveness of private charity by backing bank loans for students from poor and low-income households.

The initiative was largely successful. Within a few years, two-thirds of American banks were making loans to well-qualified students from impoverished backgrounds, and default rates were many times lower than those of federal loan programs. USAF eventually became the country’s largest student loan guarantor.

In today’s Pope Center feature, Harry Painter discusses how the libertarian-based organization eventually morphed into the Lumina Foundation, a $1.3 billion nonprofit that donates money to various organizations and programs to increase the number of Americans with college degrees.

Lumina was created in 2000 after government-sponsored Sallie Mae purchased USA Group, which had operated USAF. Per federal regulations, proceeds of that sale had to go to a nonprofit successor. Enter the Lumina Foundation, which received $770 million from the Sallie Mae transaction.

“When it comes to bankrolling the movement to put more people in college, there is no one bigger,” writes Painter, who also notes the irony of Lumina’s federal origins and the fact that the foundation would not exist but for a “group of individuals who tried to demonstrate that the federal government does not need to lend money to students – that voluntary society can solve gaps in college access.”

Read the full article here.