Tag Archives: Federal Direct Student Loan Program

Do Some Democrats Really Believe In Free College?

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Breitbart posted a story today about a recent audit of the University of California. During the time that she oversaw the University, University of California President and former Obama Secretary of Homeland Security Janet Napolitano raised tuition. That doesn’t seem all that unusual–tuition is raised all the time. However, there is more to the story.

The article reports the results of the audit:

The cover page for State Auditor Elaine Howle’s 167-page audit report states bluntly that the UC president’s office  “Failed to Disclose Tens of Millions in Surplus Funds, and Its Budget Practices Are Misleading.”

 The audit found that the UC spent $32.5 billion on expenses during the 2015-16 school year to fund 10 campuses, five medical centers, and its Office of the President headquarters. Although the UC states that its “fundamental missions are teaching, research and public service,” the UC only spent “$6.7 billion (21 percent) on teaching, “$4.6 billion (14 percent) on research” and “$630 million (2 percent) on public service.” The other $20.6 billion (63 percent) was spent on non-fundamental activities.

The audit highlighted criticism in January from students and lawmakers after the UC regents approved President Napolitano’s 2.7 percent tuition increase for the 2017-18 year, given that UC tuition nearly doubled from $6,141 in 2006–07 to the current $12,192 this school year.

In addition, State Auditor Howle’s audit found the “Office of the President has amassed substantial reserve funds, used misleading budgeting practices, provided its employees with generous salaries and atypical benefits, and failed to satisfactorily justify its spending on systemwide initiatives.”

The article further explains that the Office of the President interfered in the audit process. The article includes a list of financial issues discovered in the audit. The problems were outlined in a cover letter sent to California Governor Jerry Brown with the audit. If you follow the link above to the article, the list is posted there.

The Democrats are on the record as stating that they want free college for everyone. Meanwhile, the actions of Ms. Napolitano cause me to question the sincerity of that desire. There is also Senator Elizabeth Warren who make $300,000 to $400,000 per year for teaching two or three college classes a week. Didn’t these people study economics? Where do they think the money to pay the teachers and keep the buildings in a reasonable state of repair is going to come from if college is free?

The rapid increase in tuition costs is largely due to the government involvement in student loans. The colleges have no incentive to cut costs–students can get government loans to pay outlandish tuition costs. The government has no incentive to look carefully at the students taking out the loans–it’s taxpayer money. And meanwhile the current student loan debt is larger than the current credit card debt in America. It is a bubble waiting to burst, and the taxpayers will be left holding the bag. The student loan program is another federal entity that needs to be put back into the hands of private banks who understand how and when to lend money. Meanwhile, colleges need to learn to control their spending. Tuition increases should be about level with the rate of inflation.

The following chart shows what has happened to college costs from 1985 to 2011. The chart is from a website called inflation data:

The government took over the student loan program in 2010.

 

The Student Loan Problem Gets More Interesting

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On March 20, 2017, Judicial Watch reported the following:

Judicial Watch announced that it today filed a Freedom of Information (FOIA) lawsuit in the U.S. District Court for the District of Columbia against the U.S. Department of Education seeking records relating to then Obama administration’s “coding error” that resulted in masking that most borrowers are failing to pay down their federally-subsidized student loans (Judicial Watch v. U.S. Department of Education (No. 1:17-cv-00501)).

The Obama administration’s Obamacare legislation also included provisions that resulted in the federal takeover of the student loan industry, which radically increased taxpayer subsidies of higher education loans.

The Education Department acknowledged in early January that the coding error resulted in wildly inaccurate College Scorecard repayment rates. The significance is substantial, according to The Wall Street Journal:

The department played down the mistake, but the new average three-year repayment rate has declined by 20 percentage points to 46%. This is huge. It means that fewer than half of undergraduate borrowers at the average college are paying down their debt.

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Last month the Government Accountability Office (GAO) projected that loan forgiveness for borrowers enrolled in the plans could cost upward of $108 billion. GAO rapped the department for underestimating the costs due to “insufficient quality controls” and “unreasonable assumptions.” It’s possible the putative “coding error” is connected to this ill-management.

As the Journal notes, “The other scandal is that the Obama Administration used the inflated Scorecard repayment data as a pretext to single out for-profit colleges for punitive regulation.”

Judicial Watch filed today’s lawsuit after the department failed to respond to a January 29, 2017, FOIA request for:

  • Any records concerning the coding error in the calculation of repayment rate data contained in the College Scorecard, as disclosed on January 13, 2017. . . . Requested records include, but are not limited to, records identifying causes of the coding error and steps taken to correct the error, communications within [the Education Department] regarding the error, communications with third parties concerning the error, and records relating to the public announcement of the error.

“The government-run student loan racket is a disaster for taxpayers and has been abused to target for-profit competitors of liberal-controlled ‘public’ universities,” said Judicial Watch President Tom Fitton. “The Trump administration should quickly respond to our FOIA lawsuit about this scandal.  The Trump administration has an opportunity to drain the swamp in higher education by exposing the truth about their expensive taxpayer subsidies.”