By Richard Vedder
It is a huge news day in higher ed. Rather than try to talk about everything in one blog, I will divide it into smaller pieces.
Yesterday's vote of the House of Representatives on the higher education bill was predictable, but it seems, fortunately, that it is not the end of the story.
While House Democrats were congratulating themselves on voting the most important improvement in higher education since the GI Bill, my early reading is that the bill is something of a disaster. It remains to be seen what happens from this point forward, and whether George Bush ultimately will have the guts to veto legislation that will do almost nothing to fundamentally improve access, accountability or transparency in higher education.
The Dems want to throw billions into subsidizing interest rates on student loans -- much more than on expanding Pell Grants. They want to finance this by cutting the fees of loan providers. One consequence of this bill came immediately apparent: an over $2 billion reduction in Sallie Mae's market valuation as a private equity buyer of the company has threatened to bail out. I don't think interest rates or loan fees should be set in law by administrative fiat, but should be determined by market forces, an idea supported by the moderate Democrat-leaning think tank Education Sector, among others. Spending taxpayer dollars to make it easier for persons to borrow more money just fuels the tuition cost explosion further, and is about the worse waste of public dollars I can imagine.
Actually, it is NOT the worse. An even more invidious provision in this abomination of a bill is the loan forgiveness provision for "public service." The idea seems to be that there are two types of jobs --ennobling altruistic good jobs, working for Government, and bad, crass, and greedy jobs, working in the private sector. If you work for General Motors or Microsoft, you repay your loan. If you become Nancy Pelosi's press secretary, you don't have to repay. That is terrible thinking, terrible policy, and I hope that it never becomes law.
As disorganized, demoralized and devoid of ideas that the Republicans are today (possibly excepting Newt Gingrich), and as rich and unified the Dems are, I think the Dems will be in trouble in 2008 for trying to make bills that are turkeys like this into law.