The Right Step on Student Loans

In 1823, Thomas Jefferson laid out in a letter his plan for public education in Virginia and more generally, throughout the United States.

The public education… we divide into three grades: 1. Primary schools, in which are taught reading, writing, and common arithmetic, to every infant of the State, male and female. 2. Intermediate schools, in which an education is given proper for artificers and the middle vocations of life; in grammar, for example, general history, logarithms, arithmetic, plane trigonometry, mensuration, the use of the globes, navigation, the mechanical principles, the elements of natural philosophy, and, as a preparation for the University, the Greek and Latin languages. 3. An University, in which these and all other useful sciences shall be taught in their highest degree; the expenses of these institutions are defrayed partly by the public, and partly by the individuals profiting of them.

Today, President Obama signed a series of fixes in the health care bill, which in itself is nothing to be proud of. There is part of the bill, however, that is worthy of note and, in my opinion, represents a good step in providing higher education in an affordable manner.

Starting July 1, all new federal student loans will be direct loans, delivered and collected by private companies under performance-based contracts with the Department of Education, according to officials. Interest rates for some borrowers will also be lowered.

The new law, which first passed the House in September, greatly expands the Pell Grant program for low-income students. The reforms aim to revitalize community colleges and increase support for institutions that serve minorities and historically black colleges.

This reform of the federal student loan programs will save taxpayers $68 billion over the next decade,” Obama said in his weekly address Saturday. “And with this legislation, we’re putting that money to use achieving a goal I set for America: By the end of this decade, we will once again have the highest proportion of college graduates in the world.”

Part of what differentiates America from the rest of the world is that we guarantee equal opportunity, but leave the outcome to the devices and ability of each individual. This insures that those who are willing and capable can succeed, no matter their background.

The old way student loans were handled was inefficient and expensive. For students, the government, the bank and the school all require separate applications. The school must then get in touch with the government to find out how much the student deserves and then the school must certify to the bank the student’s status and then the bank must send a promissory note to the student and  it goes on and on. Now, hopefully there will be one application – making it easier to apply and less intimidating for those who think they won’t qualify.

The old way, banks were given billion in subsidies to give out student loans. They make most of their money back over a 10 or 15 year period and so they pocketed billions in taxpayer dollars. While they were taking a certain amount of risk, it was risk that was too costly to subsidize via a middleman.

It makes more sense for the government to handle student loans. I know, I know, sounds crazy but it’s true. Because the risk is so great, it’s expensive for banks to give out loans over such a long span. The government really is the only institution that can afford to hand out billions over a long period of time.

In no way do I think I’m compromising my limited government values by feeling this way. Jefferson was clear in saying that government’s have purpose and it’s in all of our interests to educated the masses. An educated person is more productive and prosperous than an uneducated one. The cost of education is certainly cheaper than the cost of the effects caused by uneducated people. Uneducated people need welfare, unemployment and health care provided to them. They cause strain on our social system and pull down our economy, rather than contributing to it.

As Jefferson made clear, all people should be educated. Some, more so than others, but nonetheless all. And no one should be denied opportunity because they cannot afford it.

The Future of the GOP

After browsing The American Blog today, I wanted to share a quote from John Fortier on the future of the Republican Party.

Make no mistake about it – the Democratic Party is growing. It’s demographics – hispanics, high-educated white voters – are growing and more and more young people are associating themselves as social liberals who care little for fiscal or economic conservatism.

That spells trouble for Republicans and according to Fortier it means:

The GOP needs more Bob McDonnells and Scott Browns, not wide-eyed, good government types or stodgy conservatives, but people with a mix of conservatism and at least a part of the populism that is mainstream in the middle class.

Fortier is addressing an original piece, which might be worthwhile to look at in part. Henry Olsen at National Review addresses what may lead to the downfall of the GOP.

My thoughts on the issue are fairly straightforward. The Republican Party needs to have a positive voice that advocates fiscal discipline, pro-growth economic policies and a strong national defense plan. The approach should be level-headed, involve moderation and seek pragmatic solutions to policy challenges.

We should concentrate first on balancing the federal budget by reforming the tax code and cutting unnecessary spending. Tax reform should create a more capital friendly environment that encourages small-business growth and corporate investment at home, not abroad. Entitlement spending should be near the top of the list when it comes to what needs reform. Our social programs cannot be responsible for bankrupting our nation. Underwriting the world’s security is expensive and unfortunately, we must make a choice between financing a modern welfare state or being the world’s most powerful – and most secure – country.

We should call for the continued reform and strengthening of our armed forces. Unfortunately for Congress, this may mean their districts will lose important government contracts.

Social issues like gay-marriage and abortion should be addressed at the state-level where the people can make their own decisions. We should recognize, however, the inevitable fact that the Court is more than likely to address these issues from an equal rights standpoint.

Our family first approach should advocate an egalitarian system and a business world that accepts women as part of the workforce and as mothers.

Health care and education also need serious reform. There are a number of other issues that deserve attention, but we must develop priorities.