This morning's post about Judd Gregg's weird analysis of the student lending program attracted a lender lobbyist into the comments -- Kevin Bruns of America's Student Loan Providers. Exciting stuff! Here's what Kevin had to say:
Talk about "fast and loose" on student loans.
Right out of the starting gate the author grossly misstates the already loosey-goosey OMB/CBO cost savings projections: The president's plan to eliminate federal guaranteed loans "will save hundreds of billions of dollars."
Maybe in your children's childrens lifetimes. The OMB projection comes no where close to that stratospheric sum. Nor does CBO.
Touche, salesman, I was off by an order of magnitude -- that's what I get for blogging early in the morning. Some real facts? The most recent CBO report makes clear that taxpayers spent at least $1.3 billion subsidizing your industry last year, far more than the cost of administering the direct lending program. Here's a report [PDF] from the New America foundation that goes into detail about why the FFEL program costs so much. And, in the president's budget [PDF], the OMB estimated the savings from eliminating the program would be $4 billion a year. This somewhat older report [PDF] from the Center for American progress estimates savings at $6.5 billion a year. Maybe you think that's chump change, but it seems like a healthy chunk of taxpayer money to me.
Finally, Tim, “bribery”? I looked at the PBS segment you linked to and I found no such thing. More important, do you seriously think 5,000 schools in this country, some of the nation's finest, can somehow be bought like that. That's too cynical for words.
New York State Attorney General Andrew Cuomo refers to these schemes as "kickbacks" -- essentially, student lenders paid cash to schools to get students referred to their programs. It seems to me that anytime you are making illegal payments to someone in exchange for a service, that's a bribe. And yes, I do think schools in this country can be bought like that. More than 63 schools were bought like that, including Columbia University, Georgetown University (my Alma mater), Wake Forest University, University of Kansas, Central Michigan University, St. John's University, University of Washington, University of Oregon, University of Texas El Paso, Rutgers University, Georgia Tech, Florida State University, Florida Atlantic University, the University of Central Florida, and the University of Pittsburgh. Here's Cuomo on what his investigations in student lender corruption unearthed:
The investigation uncovered among other things, illegal steering to preferred lenders by specific schools, revenue sharing agreements between schools and lenders, university financial aid call centers staffed by lender employees, gifts and trips from lenders to a school's financial aid directors, and even stock in lender companies directly given to financial aid officers.
Sounds pretty corrupt to me. Back to our friend the lobbyist...
Finally, taxpayers are not spending money on the lender-based program. The government has made few if any subsidy payments to lenders in nine years—you can look it up, as Casey Stengel used to say. In fact, the program makes money for the government.
You say tomato, I say subsidy. You are right that the Bush administration stopped guaranteeing your industry a 9.5 percent interest rate of return after The New York Times broke the news about that additional $1 billion per year slush fund. That doesn't change the fact that your industry is still being paid billions of dollars for services the government can provide more cheaply. That's my case, Kevin. Where are you getting your numbers from?
-- Tim Fernholz
