There are at least three things you can count on in this city. They are a governmental bias against private-sector solutions to just about anything, government’s seemingly inexhaustible ability to make any bad situation worse and the reluctance of anyone associated with a program that doesn’t work, was badly conceived or has outlived its usefulness to admit any of these things.
The Federal Direct Student Loan Program put together during the Clinton years is a case in point. President Clinton and his fellow Democrats, along with more than a few Republicans, wanted to make it easier and perhaps cheaper for young people in college to borrow the money they needed to pay today’s escalating tuition and living costs, and they weren’t happy with the federally guaranteed loan program launched during the Johnson administration and known as Federal Family Education Loan Program. Lenders under this program had during the ’60s and ’70s lent a good bit of money to an emerging class of overeducated, high-income deadbeats who were simply walking away from their obligations and forcing taxpayers to pick up the tab, so Clinton decided to replace private-sector lenders with presumably more competent and responsible government bureaucrats.
Better, he thought, to make direct loans to students using taxpayer money. This would cut out the middleman, satisfy his party’s ideological mistrust of and hostility toward the private sector and make it possible for more Americans to attend college at a lower cost. Besides, by marking the loans up a couple of points, the program would be self-financing or even profitable and everyone, save the bankers cut out of the action, would be happy.
It was a solution calculated to warm every liberal heart in Washington, and it did. The only problem was that it didn’t work very well. In fact, it began almost immediately to lose money by the bucketful. Government just isn’t very good at controlling costs or tailoring much of anything to the needs of either individual students or educational institutions. Over the decade in which it has existed, the program has lost more than $10 billion and more than 500 colleges and universities that signed on with enthusiasm in 1995 have bailed out.
In fact, today only about 23 percent of the nation’s colleges and universities even participate in the program. Most have gone back to those cold-hearted bankers because they’re able to give students personalized service and actually charge less for their services than the Clinton program. They are also, being private-sector types, far more responsive to the needs of the students and institutions with which they deal.
What’s more, the defaults that created so many problems for the privately run subsidized program back in the ’70s have all but vanished. It seems that while liberals were planning to replace the program with direct loans, the Reagan and first Bush administrations had reformed it and today it has managed to outcompete the direct-loan program across the board.
Given this reality, one would think that Congress would breathe a sigh of relief, end the unsuccessful and wasteful direct-loan program and get on with other things … like cutting the deficit.
But no, the direct-loan program’s champions, led by Sen. Edward Kennedy (D-Mass.) and his buddies at The New York Times, have what to them must seem like a better idea. They want to bribe colleges like Michigan State that have dropped out of the direct loan program to come back by increasing Pell grants to those institutions that participate. This is, of course, just another way to prop up a failing program and will cost taxpayers even more money.
Their goal is clear. They want to destroy the private-sector alternative, not because it doesn’t work but because it does. The New York Times editorially endorsed the Kennedy proposal as a way of “weaning” institutions away from the alternative program so that they will ultimately be forced to participate in the direct-loan program, whatever the cost.
Most people are sensible enough to cut their losses and abandon projects that don’t work, but such people are rare in Washington, where it seems logical when one’s pet program doesn’t live up to expectations to throw more of other people’s money into it and do everything you can to wipe out the alternatives.
What a city.
Keene, chairman of the American Conservative Union, is a managing associate with Carmen Group, a D.C.-based governmental-affairs firm (www.carmengrouplobbying.com).