Q: should Washington have a bigger share of the student-loan industry?

0 Comments | Insight on the News, April 29, 1996 | by Richard W. Riley, | Grover G. Norquist

The Clinton administration threatens to veto the entire 1996 Omnibus Budget Act unless the scheme for government-run student loans goes forward. But like the outcry against government-run health care, the opposition to direct lending has surfaced in diverse circles. Republicans nearly are unanimous in their opposition while Democrats are far from unanimous in their support for it. Reps. Bart Gordon of Tennessee, William Orton of Utah and Earl Pomeroy of North Dakota are three Democrats who strongly oppose the expansion of direct lending and are among 19 Democrats who have cosponsored legislation to prevent Clinton's takeover of the student-loan program.

Past education secretaries are unanimous in their opposition to direct, lending. Republicans Lamar Alexander, Labro Cavazos and William Bennett and Democrat Shirley/Hufstedler have signed letters opposing Clinton's plan. Do all these folks know something the Clinton White House does not?

Hardly. Direct lending is bad public policy; it's antithetical to everything voters expressly said in the 1994 elections. From its failure to screen out high-risk schools to its cost to taxpayers, direct lending's track record begs for repeal. But that hasn't stopped the Clinton White House. The president is content to steamroll the interests of taxpayers and students in the name of an ideological obsession. While his "big-government" proclamation won points in the world of political punditry, Americans will not be duped so easily. Direct lending falls into the same big-government category as Clinton's 1993 tax hike (the largest in the nation's history), his advocacy of government-run health care and his nationalization of charitable volunteer work (Americorps). So much for "reinventing government."

A more accurate measure of Clinton's commitment (or lack thereof) to the plight of students and taxpayers is revealed-in his historic veto of the first congressionally approved plan to balance the nation's budget since 1969. The congressional Joint Economic Committee estimates that by stemming red ink the Balanced Budget Act would trim interest rates, saving the typical college student with an $1 1,000 10-year loan nearly $1,900 during the life of the loan. Instead of exercising moral leadership in an effort to stem the red ink, Clinton rails against Republican "cuts" in college loans. But his GOP bashing does not ring true. The Republican budget plan rewarded students with a nearly 50 percent increase in total funding for loans during the next seven years, from $25 billion in 1995 to $36 billion in 2002. In addition, under the Republican Balanced Budget Act, taxpayers would be able to deduct a portion of the interest paid on student loans for the first time since 1986. The student-loan plan approved by Congress provided for $4.9 billion in administrative savings only, to be brought about by reducing bureaucracy and doubling the risk and fees on private-sector loan providers. No "cuts" real or imaginary, affected students or their families.