The issue of the day is the shift of student loan origination from commercial banks (and Sally MAE) over to the government.
I am noting that the left's "Welfare Mother" is the corporation and banks. They slander these entities just as they claim that Ronald Reagan put a face on his enemy for the purposes of slander.
This is not about the shift from bank origination to the government. The flaw in their thinking extends far beyond this point.
Back Origination Flow
The flow from bank originated student loans is depicted to the left. The argument is that the commercial banks don't provide enough "value add" to justify their their profits made from their collection of interest payments.
In effect the banks originate the loan. Uncle Sam is a virtual "co-signer". Thus if the student defaults upon the loan the bank merely goes to Uncle Sam and demands their money. The loan is written off. The government's debt is increased.
The banks and those who defend this line of business argue that several thousand jobs will be lost in the process. Sally Mae alone has 600 jobs at risk as the government takes over this function.
In the new scheme the bank originator is removed and the government originates the loan and does the monthly servicing.
When the student defaults the government will take the hit - just as was the case with the previous model.
So What Am I Grieving About?
First watch the video:
You probably do not have the Flash Player (Get Adobe Flash Player Here) installed for your browser or the video files are misplaced on your server!
My point is that those who use the banks as the "Welfare Queen" fail to rationally apply their indictment.
Lets go back to the first graphic and plot out the benefits that have been acquired in the exchange:
- The Student -> Education
- The School -> Tuition Money
- The Bank -> Interest Payments
- The Government _> A More Educated Populace
In his attack upon the "Welfare Mothers" - the Banks - he fails to see WHO'S benefit endures despite the student default.
The School - They received money for educational services rendered. Once paid for via the loan they have no inclination to pursue the student for failure to pay. They already have their money.
The Student - The student has received the benefit of education and now he has failed to live up to his commitment.
Jesse Jackson is angered that the banks "profit" off of the student's default. They merely go back to the government and demand that the "co-signature" be honored.
What does Jesse Jackson say about the STUDENT which has assumed the benefit of the education?
- His Default On The Loan? - Nothing
- His Matriculation From School With Debt In Hand? The debt burden is an unfair anchor upon him
- His Inability To Find A Job? Shameful that the "clock for repayment of the loan" starts immediately
Jackson proposes ZERO INTEREST RATES on student loans.
A few years ago it was "Iraq War Spending" that was used in the "Well why is it that we are spending all of that money on {fill in the blank}?". Today it is "AIG", "Cash For Clunkers", and "Bank Bailouts".
If you think that they are going to stop with their own raid upon the treasury (and/or transference of personal liability for their favored class) you are wrong.
WHAT ABOUT THE TUITION INCREASES?
When it comes to health care we hear about rampant increases in costs. This is triggered by health insurance companies, drug companies, equipment manufacturers and profiteering doctors. Their salaries need to be clipped. A centralized government entity needs to regulate their payments.
Does anyone notice the absence of attack of tuition increases when it comes to education financing? Instead the fact that MORE money will be sent into the hands of the students for payment to the school is sold as a good thing.
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