Direct Loan Program Expands Out of Health Care

The massive health care bill that has been in the spotlight for more than a year was voted on and passed yesterday. There is still some last minute wrangling going on in both the House and Senate before the bill will be signed by the President, but a somewhat surprising outcome of this bill is that the U.S. government direct student loan program will also get a huge boost.

This program has been fought by student loan companies ever since it was first introduced during the Clinton administration. These loan companies have employed a small army of lobbyists to influence Congress to cut the government out of making student loans directly to students and require these loans to go through the loan companies.

It has been conclusively proven that the costs to the government are much lower if student loans are made directly to students. The difference is enormous, and this is part of the reason that these two seemingly disparate measures were combined. That is, in order to show that the health care bill is paid for, a savings of over $60 billion U.S. is projected for cutting out the student loan companies. In other words, the federal government has been simply giving away billions of dollars to student loan companies over the years. Most of the leading executives in these companies have consequently and not surprisingly become rich. What most people are unaware of is that these companies have been preying on many student borrowers in order to get their hands on this money.

One could ask, if the government could save taxpayers billions of dollars in wasted spending, why wouldn’t they do this on principle? Why does this bill need to be attached to the health care bill in order to realize these savings? The answer is that the lobbyists mentioned earlier who have been hired by the student loan companies have been extremely effective. It seems that by offering a little campaign contribution money to our elected officials, in most cases Republicans, and throwing in a few little perks like trips to exotic locations or perhaps a job for a relative, the Congress will bend to wishes of the student loan companies. They will allow tens of billions of dollars to be taken from American taxpayers and simply handed to these companies.

And what is the big argument for continuing on this wasteful path? The answer is that it will save jobs. In other words they take money from some people just so they can give it to others. If a few billion is skimmed from here or there, who cares? It is a little like the military airplane program that was discussed during the budget debate last year. Some expensive airplane costing billions of dollars is being made for the military, but the military has publicly stated that they have no use for the plane and don’t want it. They have asked for the program to be stopped because it takes away resources that could be used effectively elsewhere. So what do our congressional leaders do? They keep building these useless airplanes because it will save “jobs”. A job that is not producing anything of use and which exists simply because congress is extorting money from taxpayers is not a real job. It is a government giveaway program. It benefits no one but the person receiving the money and the member of congress whose district or state the plane factory resides in, because the people who are the recipients of these bogus salaries keep voting for him or her.

So in any case the direct student loan program will expand greatly soon, and the student loan companies will hire more lobbyists to once again try and get it reversed as they did before. In the meantime some student loan borrowers will avoid being in the clutches of the student loan companies and won’t be preyed upon. However, there are millions of former borrowers who have gotten into financial difficulties and who will continue to be in the clutches of the student loan companies and who have no way out of the huge penalties and fees they impose. Like the 41 year old doctor who was in the news lately. She borrowed $250,000 to finance medical school, and now owes $555,000 in student loans, penalties and interest despite having made payments for some years. She has high monthly loan payments, but she will be about 70 years old before her debt is paid off. The direct loan legislation has come a bit too late for her.