Worst Democratic Senators Conveniently Add Selves to List

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Pareene

03/19/10 09:56AM

Filed to: Money

The student loan reform legislation that's tied up in the Senate is one of those no-brainer obviously good-policy bills that you have to be a corporate-money beholden parochial stooge to oppose. Those stooges signed a letter of stoogedom.

The bill would end massive federal subsidies of private student loan sharks. The only arguments against it are some talking points about how this is a "government takeover of student lending" and also people are worried that Sallie Mae loan servicers may have to seek new work as street corner check cashers or something.

Six Senate Democrats signed a March 9 letter expressing concern that pending student loan reform "could put jobs at risk" and urging consideration of "potential alternative legislative proposals" that would deliver equivalent savings. They were Bill Nelson (Fla.), Ben Nelson (Neb.), Blanche Lincoln (Ark.), Thomas R. Carper (Del.) and Mark R. Warner and James Webb, both of Virginia, home to Sallie Mae. Ben Nelson, whose state is home to the major lender Nelnet, has expressed strong doubt about the overhaul.

God, which Nelson is the worst? It is hard to decide, sometimes. (It's probably Ben.)

Anyway, in order to avoid having to deal with these people, the Democrats now plan to package the student loan thing with the health care sidecar and pass it through "reconciliation," an arcane parliamentary procedure that only requires 51 votes and two drops of the blood of the Christian Founders.

The following replies are approved. To see additional replies that are pending approval, click Show Pending. Warning: These may contain graphic material.

Unsolicited Advice Pareene 03/19/10 10:08AM

Part of the concern is that student loan lending isn't very profitable without government subsidies. If you recall, in 2008 many private lenders exited the business entirely because of small increases in their credit spreads, indicating their margins are razor-thin.

Without the participation of those private lenders, the Government is in a position to increasingly become the lender of only resort to all but the very best college students, potentially restricting access to higher education. Which I'm fine with! But you might not be, no? Especially because the "very best college students" prior to entry are typically white guys from private schools. Draining the liquidity (or the bribe, whichever you prefer) from the private lending market potential drains the minority/poor college students with anything less than a 4.0

Knight_Of_The_Burning_River Unsolicited Advice 03/19/10 10:20AM

@Unsolicited Advice: I'm confused as to how using the same amount of money, but in a different way, restricts access to higher education? More direct lending, and more money for Pell Grants doesn't seem like it would 'limit access'.

I'm willing to bet that the Gov't will have looser lending standards than just about any private institution would, as profitability isn't the Government's primary concern. So I would assume that's not your argument....

If there's another facet to the argument that's implied that I'm missing, please explain.

nicnack74 Unsolicited Advice 03/19/10 10:22AM

@Unsolicited Advice: I disagree. The Federal Loan system already participates in direct lending regardless of your GPA. When I was an undergrad at a state university I got a direct loan from the Federal Government. Ten years later as a graduate student, I attended grad school where I encountered the "middle men" private lenders. The terms of repayment were slightly different. I've now consolidated back to the Federal government. Student Loans are subsidized regardless. The point of the legislation is to get private industry to not dispense these loans, and have the Federal Government be direct lenders. It's just a raquet for private industry to make money off the backs of students. There really is no social benefit.

Unsolicited Advice Knight_Of_The_Burning_River 03/19/10 10:31AM

@Knight_Of_The_Burning_River:

The problem becomes with capitalization and interest rates. Sallie Mae is just like Fannie Mae, except it didn't completely fail during the credit crisis. It just almost failed! The primary way it provides cash to itself is by securitizing and selling student loans in blocks. Private entities are doing the same thing, of course. But since those entities can borrow drastically more than the Fed given that they capitalize with more than just student loans, here's the liquidity we're really removing:

[SUBSIDY DOLLARS] * [LEVERAGE RATIO OF INSTITUTION]

What the subsidies also do is lower interest rates. Retracting the subsidy does two things: it immediately removes cash from Sallie, which will mean it will restrict lending. Furthermore, it will need to increase rates on existing floating-rate loans. You're essentially going to tax those folks.

Assuming we completely re-allocate those funds to the Federal lending programs, great. But Pells and other grants can't and don't step in for all college expenses - kids are still going to have to go to the well in the private sector to pay for college. That market will not exist in its current form without subsidy; we're looking at drastically higher interest rates and the like. Plus, we're shifting the mechanism for choosing students from credit quality to whatever the Federal Government decides is the best standard for providing grants + subsidies directly to students. Once again, I'm fine with that, but the result will be less access to money and less access to education.

Unsolicited Advice nicnack74 03/19/10 10:35AM

@[gawker.com] private entities can provide more liquidity to the marketplace than the Federal Market without borrowing by securitizing the loans and leveraging their business. They capitalize lending with other assets, like CDs or savings-account deposits. If they stop doing that, the overall marketplace liquidity decreases, and less kids can afford education.

Once again, I'm fine with that, but you might not be.

EDIT:

Unless you increase the total value of the subsidies by spending more, either by borrowing, taxing, or cutting other spending

anonymousryan Pareene 03/19/10 10:08AM

Ben Nelson is worse. At least Bill Nelson was an astronaut. Maybe he has space madness...

AbrahamLincoln16 Pareene 03/19/10 10:17AM

I don't fucking understand conservatives. So we can't trust big government, most of which is accountable to citizens through elections, but we CAN trust big corporations, which are only accountable to shareholders?

Unsolicited Advice AbrahamLincoln16 03/19/10 10:19AM

In fairness, "Conservatives" trust neither. But then some of us become political nihilists because we realize America is never going back to a place where its businesses and bureaucracies are small and competitive.

intime Unsolicited Advice 03/19/10 10:36AM

@Unsolicited Advice: When was that? 1820?

Unsolicited Advice intime 03/19/10 10:45AM

Industrialization hadn't really concentrated capital in conjunction with political facilitation until the Reconstruction, but yeah. I've never been alive in a time period without regulatory capture and massively consolidated, vertically-integrated industyr.

quotidian AbrahamLincoln16 03/19/10 10:48AM

@lodown: Wish it were true we could do something about big government through elections. But once a program and its bureaucrats and army of well-compensated employees are entrenched, they never go away. A share of stock—at least I can sell it and be done with it.

Swifter Pareene 03/19/10 10:10AM

Kids! The US Army will totes give you up to $83,448 to help pay for college with the MGIB and Army College Fund!

Why, back in my day, all you got was some beef jerky, hard biscuits, and a worn copy of Reader's Digest from the ladies' parlor in the Officer's Club.

Check it out!

[www.goarmy.com]

(Not currently valid in the Ghey Nation.)

intime Swifter 03/19/10 10:36AM

@Swifter: Yeah, it's one way to get more cannon fodder.

Swifter intime 03/19/10 10:44AM

@intime: Haven't you heard? We use laser-guided and infra-red seeking missiles these days. Even the cannon shells have terminal guidance. Civilian casualties are way down.

Soldiering is fun these days, compared to Vietnam, and the pay is way better.

Yahweh Took My Prepuce Swifter 03/19/10 11:06AM

@Swifter: For better or worse, this was what my parents did. Left their crappy little towns and predictably low-height career ceilings to enlist. Traveled the world, went to college and grad school by night, earned their commissions.

It helps that they did this in the late 70's to the early noughts.

I meanwhile used that familial momentum to go to great schools and rack up 90k of debt.

I wonder how you get a job...

intime Swifter 03/19/10 11:14AM

@Swifter: I heard it was just like playing video games!