Lamar Alexander Defends Waste in Student Loan Program

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Pucker up for those bankers, big fella
  • Pucker up for those bankers, big fella
It's the goofiest system imaginable, but it's indicative of how moneyed interests -- in this case banks -- are able to profit from government programs by buying Congress to look the other way.

The federal student loan program is waste personified. The feds kick money to banks, who in turn lend it to students -- while the feds take the risk if the loans go bad. In short, it's a program that allows banks to use someone else's money (that would be yours) to profit in a scheme where someone else takes the risk (that would be you).

President Obama wants to change the rules by cutting out the middle man and loan directly to students. The cost savings would be enormous, and more money would be available to go directly to students. (Banks, of course, could still make their loans with their own money and own risk.)

But guess who's coming out in defense of government waste? Yes, that would be Lamar Alexander. He doesn't want government in the lending business, so he'd prefer we continue to get ripped off. As the good senator told the Associated Press: "I don't think Secretary Duncan came to Washington to be named Banker of the Year. The Department of Education should not be a $500 billion national bank."

But as the president notes, the current system has little to do with the vaunted free market: "It's not a free market when we have a student loan system that's rigged to reward private lenders without any risk."

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