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Student Loan Reform Begins; More Change Needed

By TChris, Section Crime Policy
Posted on Sat Feb 04, 2006 at 02:00:49 PM EST
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by TChris

Society can shuttle people between prison and criminal lifestyles, or it can help offenders break that cycle. A rational approach to drug crime (putting aside for the moment decriminalization of marijuana offenses) emphasizes help and support, including drug and alcohol counseling. Equally important to many who are ready to break the cycle is an education that will allow them to compete for meaningful jobs. That's why the congressional decision to make drug offenders ineligible for government-assisted student loans was appalling.

Fortunately, Congress is slowly moving the law toward rationality.

Students convicted while receiving federal aid will still lose their eligibility - for one year for a first possession offense, two years for a second and indefinitely for a third, with harsher penalties for selling. But under the new rules, which President Bush is expected to sign into law, offenders who weren't enrolled in school and getting taxpayer support at the time when they were convicted can apply for aid. The change is expected to benefit mostly older students ... who had finished school before they were convicted and now wish to go back.

An about-face would be an even better course correction.

"I think some nontraditional students will benefit from the partial reform, but unfortunately tens of thousands of students will be left behind without the ability to pay for school," said Tom Angell, campaigns director for the group Students for Sensible Drug Policy.

Rep Mark Souder claims the law has a deterrent impact because students will be less likely to abuse drugs if a conviction will lead to a loss of financial aid. Yet "SSDP says at least 175,000 people have been denied federal financial aid because of their drug records since the government began asking for the information on its financial aid forms in 2000." If the law failed to deter 175,000 students, there's reason to question whether the law is an effective deterrent.

While it's uncertain that the law deters drug crimes, it's certain that the law prevents some from completing the kind of education that could turn them into responsible, productive, tax-paying individuals. That's a bad trade, and it's a policy decision that Congress needs to revisit.

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    Student Loan Reform Begins; More Change Needed | 14 comments (14 topical)
    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#1)
    by Talkleft Visitor on Sat Feb 04, 2006 at 02:35:59 PM EST
    Gentlemen: prepare to be blown away. How about free higher education? Forget student loans why not free higher education? You might think I am joking, but I am not. State lotteries are supposed to go to education. In fact in Georgia, if memory serves, if you are a resident and you get into a state school you go for free. Yes you do have to maintain a certain GPA, but that is just practical, otherwise you are wasting money. So lets stop wasting lottery money on inane things and truly apply it to education. Granted this is a state's rights issue and should be dealt with on a state by state basis, but why not push an agenda such as this? So why don't more states move in this manner to provide funding for higher education? I would love to see a shift in that policy.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#2)
    by Talkleft Visitor on Sat Feb 04, 2006 at 02:47:06 PM EST
    Also, why not open this up to private universities as well. For example, if your son or daughter is smart enough to get into Princeton shouldn't they be allowed to go for free, or at least at a substantial reduction in cost? Why should we deny this person the chance to thrive and get an excellent education? Careful this is a trick question. So you know, I do truly believe in everything I have written so far.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#3)
    by Edger on Sat Feb 04, 2006 at 04:19:23 PM EST
    if your son or daughter is smart enough to get into Princeton shouldn't they be allowed to go for free, or at least at a substantial reduction in cost? I think you're on to something here, BSRB. If someone has the drive and intelligence and desire to learn, society would be better served by allowing them to get the education they want, paid for with taxes, on the probably safe bet that in the long run they will return more to society than the cost of the education. No? Certainly more than the cost of the person being supported by welfare or turning to parasitical crime to support themselves.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#4)
    by Talkleft Visitor on Sat Feb 04, 2006 at 04:29:39 PM EST
    edger: you said
    If someone has the drive and intelligence and desire to learn, society would be better served by allowing them to get the education they want, paid for with taxes, on the probably safe bet that in the long run they will return more to society than the cost of the education. No?
    You will have to forgive me, but I am a fiscal conservative. Therefore, I agree with everything you said except that word in bold. You have a base dislike for the President, well I have a base dislike for taxes. That is why I brought up the lottery. Lotteries generate more than enough money to pay for this, in fact that is there purpose in most states, and they do this without increasing the tax burden.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#5)
    by Talkleft Visitor on Sat Feb 04, 2006 at 04:36:48 PM EST
    I asked about Princeton for a specific reason. If you are willing to give money to Princeton are you willing to give money to a school like Georgetown (a Jesuit University)? I think you can avoid the separation of church and state conundrum if you use the lottery, but I am not sure. Furthermore, in my opinion, if money is equally available to all private schools regardless of religious affiliation, the law falls outside of the nonestablishment clause. But I could be wrong.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#6)
    by Edger on Sat Feb 04, 2006 at 04:38:28 PM EST
    Ok, Lottery. Taxes. Either way. Or maybe there are other ways. I used the word taxex there as a sort of a shortcut way of having society (all of us) pick up the tab, on the theory that it's all of us who will benefit by more than the cost, by having educated people around us. I'm not an economist or an accountant, but it seems to me that it makes sense.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#7)
    by Edger on Sat Feb 04, 2006 at 04:39:53 PM EST
    If the payback is greater than the cost, I think it would be a "fiscally conservative" way to go. No?

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#8)
    by Talkleft Visitor on Sat Feb 04, 2006 at 04:50:02 PM EST
    edger: I am not refuting your logic, in fact it is quite sound. As I said I just have a gut reaction to that word. You are correct though, and you have correctly guessed the way I look at most situations. I approach almost every situation with an analysis of the costs and benefits. Even taxation in this case might be considered fiscally conservative. I tend to look for other methods first however and look to taxation as only a last resort.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#9)
    by Edger on Sat Feb 04, 2006 at 04:58:21 PM EST
    Me too. I hate paying taxes, and try to pay as little as possible. It's the fiscally conservative in me I guess. Public elementary and high school is free to the students. It works. It produces educated people and the benefit to society is probably greater than the cost, and greater than the cost of not educating them. Why not extend the idea through college and university? I just try to look at things from a perspective of how can we benefit the most people for the least cost. I have no idea if others here think this way. I hope so.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#10)
    by Talkleft Visitor on Sat Feb 04, 2006 at 05:10:53 PM EST
    Well I am not so optimistic about our public education system, but I don't think that public funding should be taken away from it. We have a need, no an obligation to educate our youth (of which I am one, sort of); I just don't know if we are doing it in the best possible way. I am however getting off topic a little...

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#11)
    by Talkleft Visitor on Sat Feb 04, 2006 at 05:26:45 PM EST
    The Department of Education has been stifling SSDP from getting our hands on information about how the financial aid ban affects students around the country. They denied our Freedom of Information Act fee waiver request seeking a state-by-state breakdwon of students affected by the law. The government claims releasing the data could lead to drug legalization and that we (a nonprofit org) might profit from it. We're now suing them. More: http://DAREgeneration.blogspot.com

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#12)
    by aw on Sat Feb 04, 2006 at 09:20:09 PM EST
    With a current endowment of $11.8 billion, Princeton shouldn't need any extra help.

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#13)
    by squeaky on Sat Feb 04, 2006 at 09:34:14 PM EST
    Looks like Boehnart and Sallie are in bed together and the result is to F#$k the students.
    House Majority Leader Rep. John Boehner's (R-OH) close relationship with the private student loan company Sallie Mae came "under scrutiny by the news media and some lawmakers" during his race to replace Tom DeLay, and for good reason. Sallie Mae and other loan companies have generously donated to him. In return, the former chairman of the House Committee on Education and the Workforce "shepherded through Congress student-loan legislation that will affect Sallie Mae's bottom line and offered assurances that he will protect such lenders' interests."
    Who wudda thunk it? think progress

    Re: Student Loan Reform Begins; More Change Needed (none / 0) (#14)
    by Talkleft Visitor on Fri Feb 24, 2006 at 10:39:22 PM EST
    Here's a good story I just read about how Sallie Mae killed competition in the student loan industry and how Boehner made it possible. Competition Is Good, Except When It Comes to Our Friends Killing competition for student loans hurts students and raises federal deficit By Ken Moser February 13, 2006 From the (Pennsylvania) Times News. Economist Adam Smith was not a proponent of free markets, anymore than Isaac Newton was a proponent of gravity. Both of these groundbreaking scientists simply told us about these seminal forces, and left us to figure out we would be pretty stupid to ignore them. If Adam Smith were here today and looked around the world, he would be happy to know about the power of this theory: Free markets create free people. Free people create prosperity. Pretty simple. And because it is practiced in the United States more than anywhere else in the world, it cannot be a coincidence that we are also the freest and most prosperous nation in the world. Reliance on free markets is not a partisan issue, but the fact is, Republicans are more sympathetic to the teachings of Adam Smith than Democrats are. That is why a recent Republican move to quash competition for student loan refinancing is so puzzling and why believers in the benefits of free markets who know about this action are so upset. Republican legislation to kill competition for the 30 million people who hold student loans did not get that much attention. Which is hardly a surprise since it happened during the Holiday season on a Sunday morning at 3 a.m. Most people were focused on how Congress raised interest rates on these federally guaranteed loans. But this action to restrict competition is potentially more far reaching, and more damaging to students and to efforts to reduce the federal budget deficit. It happened two ways: First, Congress continued a law called the Single Holder Rule, which says that once you have your student loans from one company, you cannot change companies. Second, once your refinance them once, you cannot do it again, no matter if a different company offers better rates, longer terms or better service. Earlier versions of the law outlawed the Single Holder Rule, but in the wee, dark hours of that cold December morning that provision mysteriously disappeared. And along with it, any hope of competition, better rates, and better service for the 30 million student loan holders. Imagine if someone tried to get away with that in the home mortgage market. They would either go out of business, or go to jail for price fixing or both. Then Congress went one step further. Led by Congressman John Boehner, then head of the House Education Committee, Congress took the single most anti-competitive provision in all of American law since the enactment of wage and price controls in the early 70's, and made it worse. They effectively banned anyone from locking in low rates for longer terms. The people at the largest student lender, Sallie Mae, were ecstatic. They beat their competition, not in the marketplace, but in the lobbying place. Sallie Mae used to be a quasi-governmental agency, issuing the bonds that guarantee the student loans. Then a few years ago, their chief executive figured out that if he could get rid of its to the federal government, but keep all the rules that banned others from competing with it, that company would have a license to print money. This what the experts say is the way it has turned out, with Fortune Magazine calling Sallie Mae the second most profitable company in America. Its chief executive alone has received salary and bonuses of more than $200 million over the last five years! Adam Smith did not have a problem with profits. Just the opposite: They are a signal for more competition and lower prices. But Smith warned that when government creates barriers to competition, monopolistic profits would result and consumers would lose. What we have here today in the market for student loan refinancing is a gross monopoly. Columnist Dick Morris calls the anti-refinancing scheme an "obnoxious rip-off." Terry Savage, the financial columnist of TheStreet.com, says there is "no way" borrowers should support this plan. The New York Times calls it "Robbing Joe College to Pay Sallie Mae," the country's largest student loan provider. The Times Union of New York calls plans to outlaw refinancing a "student loan shame." Recently Fortune magazine documented how the largest student loan lender, Sallie Mae, depends on Boehner to protect them from competition to ensure their record results. The Chronicle of Higher Education said the legislation is designed to "force (Sallie Mae's competitors) out of the market. With all the talk about reforms in Congress to deal with the influence of lobbyists, no better example of this need could be cited than here. You see Congressman Boehner has been the single largest recipient of donation from Sallie Mae. He has received over $100,000! What a shame that he sold out college students so cheap. Using government to quash competition was a trick Adam Smith was well familiar with. So he would not be surprised that Sallie Mae has unleashed an army of lobbyists to put its competition out of business. He would be surprised, however, that we let them get away with it. Ken Moser is Chair of the Adam Smith of California society. kenjmoser@abac.com

    Student Loan Reform Begins; More Change Needed | 14 comments (14 topical)