Profitability always wins out over wisdom
Faced with soaring tuition and dwindling aid, record numbers of students who would excel at college are no longer applying. If the trend persists, this country could easily return to the time when the poor were locked out of higher education and college was hardly a given for middle-class families.
…The government offers two basic college loan programs. The direct loan system, developed under the Clinton administration, allows students to borrow from the government through their schools. It actually makes a small profit by cutting out the banking middlemen.
This program competes with the Federal Family Education Loan Program, under which private banks receive generous federal subsidies to make student loans that are guaranteed by the taxpayer. The cost of the program is hotly debated. But recent estimates place it at more than $3 billion a year.
The Clinton administration wanted to expand the direct loan program, phase out the F.F.E.L.P. and put the savings into Pell grants and other student aid programs. This would have been the wisest course. The banking industry blocked the move in Congress and declared all-out war on the direct loan program. The banks have benefited, as have politicians more interested in pleasing the banking lobby than in helping the largest number of students at the lowest possible cost.
