Yesterday CNSNews reported that a bill currently before the Senate would nationalize the student loan program and end the current program of federally subsidized private loans. I printed an article about this move at RightWingGranny on September 13, 2009. The article links to a Wall Street Journal article which explains the details of the plan.
According to the article at CNSNews:
"The Student Aid and Fiscal Responsibility Act - currently being considered by the Senate Health, Education, Labor, and Pensions (HELP) Committee - would eliminate the Federal Family Education Loan (FFEL) program. FFEL loans are federally subsidized and make up approximately 80 percent of the student lending industry."
The idea behind nationalizing student loans is the Democrat claim that it would save money. Their calculations failed to note, however, that some loans don't get paid back. When the default rate was considered, the amount of money that might be saved was cut in half. The other part of the equation is the cost of the bureaucracy that would be created to oversee the program.
The thing to remember when the government is planning to take over an industry or a business or service, is that without a profit motive, the incentive for efficiency is non-existent. A business has incentive to become more efficient because it will lead to greater profitability. The government is not in business to make a profit and generally operates under the idea that if they spend more than planned, they can increase taxes. That's the kind of thinking that got us the deficits we currently have.
Leave a comment