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Washington Times on Government Takeover of Student Loans

With Department of Education Remaining Mum, Kline Requests Inspector General Review of Administration’s Advocacy for Elimination of Federal Student Loan Program

WASHINGTON, D.C., November 30, 2009

The Washington Times editorial page is crying foul over recent efforts by the Obama Administration to pressure and cajole colleges and universities to abandon the most widely used federal student loan program in favor of the government-run alternative known as the Direct Loan program.

“Despite the fact that the scheme is not yet law, Department of Education officials began writing letters as early as July to college presidents about how to transition to the Direct Loan Program, as if the existing private option already were dead. … This is outrageous. It puts tacit pressure on colleges to withdraw from the private lenders regardless of what happens with the legislation. In effect, the government is bullying private lenders out of business even without benefit of law. And that comes on the heels of a report by The Washington Times of an Oct. 2 conference call between Department of Education officials and presidents of community colleges in which the officials certainly sounded as if they were asking the presidents to lobby Congress in favor of SAFRA. Political actions of this sort by executive branch officials on department time are expressly prohibited by federal law.”

 Rep. John Kline (R-MN), the top Republican on the U.S. House Education and Labor Committee, wrote to Secretary Duncan earlier this month seeking clarification on the Administration’s advocacy of the proposal. Three weeks later, with no response from the Administration, Rep. Kline followed up with a letter to the Department’s Inspector General.

“I respectfully request your examination into whether the public statements made by Department officials or the coercive tactics being employed against institutions of higher education by Department officials have violated the funding limitation found in the Department’s annual appropriations bill, the primary prohibition against lobbying with appropriated funds found in 18 U.S.C. § 1913, or the spirit of either of these restrictions.”

 Read on for the Washington Times’ take on the Administration’s schoolyard bullying.

EDITORIAL: Schoolyard bullies

Obama officials try to force out private lenders for student loans

Monday, November 30, 2009

Imagine what the outcry would be if the House of Representatives somehow passed a bill outlawing charter schools nationwide and, before the Senate had even considered the bill, officials throughout government began writing to school districts telling them to start planning to eliminate charters. The backlash would be enormous. How dare they pressure school districts to kill charter schools before the law actually has changed?

Yet that is exactly what Secretary of Education Arne Duncan, other department officials and several congressmen have been doing with regard to an attempted federal takeover of the entire student-loan industry. About 75 percent of colleges administer most of their student loans through private companies, backed by federal guarantees in the Federal Family Education Loan Program (FFEL). The other 25 percent of loans come through the Department of Education's own Direct Loan Program, which is the education version of health care's "public option." Colleges and families apparently think the private program provides better services, which is why it still serves such an overwhelming majority of the market a full 16 years after the Direct Loan Program was created to compete with it.

For reasons both various and spurious, congressional liberals long have wanted to eliminate the private lenders. Finally, with huge Democratic majorities in both chambers of Congress, they saw their chance. The House already has passed a bill, misnamed the Student Aid and Fiscal Responsibility Act (SAFRA), that would run all government-assisted student loans through the Direct Loan Program, eliminating the private option.

But that's just the House. Chances for passage in the Senate look increasingly dicey. Senators are becoming sensitive to public anger about the federal government's takeover craze, which already has snared banks and car companies. People also recognize that private lenders employ about 35,000 workers, many of whom would lose their jobs if SAFRA passes.

Despite the fact that the scheme is not yet law, Department of Education officials began writing letters as early as July to college presidents about how to transition to the Direct Loan Program, as if the existing private option already were dead. The department already has begun domestic training "webinars" and even has started planning webinars for foreign colleges to teach them how to make the change. On Oct. 26, Mr. Duncan himself got into the act with a letter to about 3,000 campuses urging them to become "Direct-Loan ready" because "the continued participation of FFEL Program lenders will be in question." On Nov. 18, Rep. George Miller, California Democrat, and Rep. Ruben Hinojosa, Texas Democrat, likewise wrote to college presidents urging them to prepare to use the public system.

This is outrageous. It puts tacit pressure on colleges to withdraw from the private lenders regardless of what happens with the legislation. In effect, the government is bullying private lenders out of business even without benefit of law. And that comes on the heels of a report by The Washington Times of an Oct. 2 conference call between Department of Education officials and presidents of community colleges in which the officials certainly sounded as if they were asking the presidents to lobby Congress in favor of SAFRA. Political actions of this sort by executive branch officials on department time are expressly prohibited by federal law.

Rep. John Kline of Minnesota, the ranking Republican on the House Committee on Education and Labor, wrote to Mr. Duncan on Nov. 3 to complain. He wrote: "The U.S. Department of Education must act as an impartial agent to assist colleges and universities, not as an advocate for its preferred legislative changes." Mr. Kline is right. The Department of Education should cease and desist. Any officials who keep up such politicking ought to be, well, expelled.

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