Saturday, March 8, 2014

College Loan Sharks

President Obama is stumping for FAFSA again, the ubiquitous all-purpose college loan/family finances proctological exam that is the gateway to college financial aid.

In a White House PR piece about the President's visit to Florida on Friday, Obama is quoted being concerned that we still need to get more students in college. “Unfortunately, there are still a lot of young people all across the country who say the cost of college is holding them back,”he said. There are families worrying about how to find the money. FAFSA is the answer, says the President, as he challenges every single child in America to fill out a FAFSA whether they think they're going to college or not.

It's natural that the big FAFSA push should come this time of year-- it's paperwork time. The theme this year seems to be "money on the table," as in "many students didn't get government loans last year and left a bunch of money on the table." I would personally like to see this table, with its prodigious piles of money. I also can't help wondering if this is the same table at which Bill Gates allegedly doesn't have a seat.

But mostly the renewed hard sell on college loans reminds me of this news from last November: that in 2013, the US Government cleared $41.3 billion in profits from student loans. If government student loans were a corporation, it would have been the third most profitable in the world, behind only Exxon and Apple.

So the feds being sad that more students can't afford college is kind of like a used car salesman expressing disappointment that more people can't afford his great cars as he settles into his giant mansion and washes his dogs with gold-encrusted champagne.

If you are setting the price for a service so that you make massive profit, you can't convincingly puzzle over how that service might be provided more inexpensively.

If the President and Arne are worried about the high cost of college-- well, the government is helping decide set that cost. Message to the White House and USDOE:  If you're worried about students affording college, you guys don't need a federal investigation or a better sales pitch- you just need a mirror. If you are concerned about the loan sharks who are holding onto the massive amount of student debt in this country, you can reach them through federal inter-office mail.

Duncan's USDOE did respond to these numbers, sort of, back when they were released. The responses seem to have been:

1) We are charging less than many high priced loan sharks, so families are still winning.

2) There are many types of accounting systems and they are very confusing. We would rather use one that says we didn't make a profit on these loans.

3) "It's actually neither accurate nor fair to characterize the student loan program as making a profit," said Duncan. So, you know, that settles it.

Meanwhile, Elizabeth Warren suggested that student loan rates be set near the borrowing rates paid to the Federal Reserve by giant banks (you know, the ones where the criminals who trashed our economy still work at their own tables of money). As of today, the administration does not seem to be considering that proposal. (Periodically we also hear a proposal to just forgive student loans; even I think that's dumb.)

So, lip service aside, it seems that college loans are one more economic sector where the administration is fighting hard for the interests of the big guys. That money on the table is money that students will have to give back, with more money, so it can sit on a huge banquet table of cash somewhere in the back where ordinary citizens don't get to see.

There are many reason, complicated reasons, that college has become so fantastically expensive. None of those issues are addressed by an administration that encourages students to rack up more debt while ignoring its own role in the ever-spiraling costs.


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