Single Payer for Kids (What happens when private companies compete with Uncle Sam)

WSJ ^ | August 20, 2009 | Editorial

[St. Louis Conservative]

Democrats are planning to use the autumn budget reconciliation to bring America further down the road to a single-payer system—and not just in health care. Responding to a White House request, pending House legislation would make the federal government the dominant lender in the $100 billion market for student loans.

Not that Congress has traditionally kept its hands off this business. As in health care, intervention in the education market has gone hand-in-hand with rising costs. While government accounts for 41% of health-care spending, the feds guarantee or issue roughly 80% of student loans, subsidizing the rates and also offering a slew of grant programs. Not by coincidence, higher education costs have risen much faster even than in the health-care market. From 1982 through 2007, college tuition and fees increased 439% in nominal dollars, almost triple the rise in median family income, according to the National Center for Public Policy and Higher Education.

Now the plan is to squeeze out what remains of the private market. Until now, there were three options for students needing to borrow for college: private loans, government loans and loans made by private lenders but guaranteed by the government. The plan for the fall is to outlaw this last category—more than half the current market—while tightening the noose around the small share that remains free and poses no threat to taxpayers. Simply put, we are watching in student loans exactly what ObamaCare's harshest critics have forecast for health care: a "public option" that ultimately destroys all competition.

Federally guaranteed loans have long offered roughly the same rates whether issued by a private lender or directly from the government. Turned off by customer service that's good enough for government work, students have voted overwhelmingly for the private lenders.

[Devils Avocado]

The better analogy would be that the public university system is the public option. (Student loans are more like, say, health insurance subsidies for the poor.) Nevertheless, public schools haven't kept private schools from getting expensive either.

[Think free or die]

And how long will it be before access to those school loans is based on politics or “volunteer” activity by the student in say . . . community organizing?

[FrogMom]

I hate these people. Their need for control is unbelievable, they are like perpetual 5 year olds!

[MaggieCarta]

The (ahem) "money" quotes from the article:

Sarah Bauder, who heads the financial aid office at the University of Maryland, recently warned Members of Congress that "The perils and costs associated with moving entirely to one loan system for students need to be re-evaluated." She notes that the Department of Education doesn't apply the same rigorous procedures as private lenders to prevent defaults.

And:

As in health care, intervention in the education market has gone hand-in-hand with rising costs. While government accounts for 41% of health-care spending, the feds guarantee or issue roughly 80% of student loans, subsidizing the rates and also offering a slew of grant programs.Not by coincidence, higher education costs have risen much faster even than in the health-care market. From 1982 through 2007, college tuition and fees increased 439% in nominal dollars, almost triple the rise in median family income, according to the National Center for Public Policy and Higher Education.

Now the plan is to squeeze out what remains of the private market.

Yep. And doing it one segment of the economy at a time.

Thanks for posting this, St. Louis Conservative.