Education Sec. Arne Duncan takes to the Wall Street Journal editorial page and tries to explain the absurdity of the Federal Family Education Loan program. Under the status quo, banks issue loans to college students and then collect interest on the loans. But if the students default, that’s not on the bank — it’s on the federal Education Dept., which repays the bank the cost of the loan. The Bill Clinton administration tried to change this heads-I-win-tails-you-lose system and did institute a direct lending program between the Education Dept. and students. But, as Duncan points out, Washington still spends $87 billion a year on FFEL.

So why doesn’t Duncan stop writing editorials and just change the policy? Well, Congress needs to do that and the U.S. Senate has still not got around to debating this issue. Some Senators – like Ben Nelson of Nebraska — may be most concerned about how abolishing the program hurts their local bank.

Comment RSS - You can skip to the end and leave a response. Pinging is currently not allowed.