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President Obama has done students in need of loans a good turn, and surprised BAR by oving to snatch $15 billion a year out of the jaws of the banks. “For decades the bankers have been getting risk-free federal money at taxpayer and student expense, by handling student loans already guaranteed by the federal government, collecting fees and then selling the loans to the U.S. Treasury.”
Obama’s Good Move on Student Loans
A Black Agenda Radio commentary by Glen Ford
“It is a shameless, $15 billion a year gift to the banking industry for risking literally nothing while siphoning off money that should have gone to students’ education.”
It’s not often that we have good things to say about President Obama. It is even more rare that the good news about his administration has to do with banks. So it is welcome to hear that the White House is making good on its commitment to eliminate the multi-billion-dollar banking boondoggle in dispensing college loans.
For decades the bankers have been getting risk-free federal money at taxpayer and student expense, by handling student loans already guaranteed by the federal government, collecting fees and then selling the loans to the U.S. Treasury. It is a shameless, $15 billion a year gift to the banking industry for risking literally nothing while siphoning off money that should have gone to students’ education.
The Obama White House first promised to cut the bank middlemen out back in February. But we have all learned to take Obama’s political promises with several spoonfuls of salt, since he often fails to follow through with pressures on Democrats in Congress. This time appears to be different. The chairman of the House Education Committee, California Representative George Miller, is introducing legislation to enable the government to loan money directly to students, thus theoretically freeing up $87 billion over the next ten years for direct distribution to students. President Obama says he wants the savings directed to Pell grants for low-income students.
“The student loan business has become a racket because of corruption of politicians by businessmen.”
The banks are crying like somebody stole from them, although they’ll still be eligible for contracts to do some of the paperwork associated with student loans. But that’s not free money, which is the kind the bankster class has gotten used to receiving under both Republican and Democratic administrations. Some of the nation’s biggest banks have already opted out of funding loans to students at community colleges. Citibank and JP Morgan Chase picked up their marbles and left the community college student loan game after the federal government stopped reimbursing banks for paying students’ processing fees. These mega-banks say the processing – at about $20 per student – cuts too deeply into their profits.
The Washington-based New America Foundation recently issued a report that recommends elimination of 35 so-called student loan guarantee agencies. These outfits rake in about one and a half billion dollars a year performing contradictory functions. They are paid a fee to help borrowers avoid defaulting on their loans, but they get an even bigger fee by collecting on the loan if the borrower defaults. Clearly this is a racket, just as the bank middlemen arrangement is a racket. But a more accurate term is: corruption. The student loan business has become a racket because of corruption of politicians by businessmen. A thoroughly corrupt society is one in which the theft occurs in the bright light of day, as part of the normal workings of the system. By that standard, the United States is a deeply corrupt nation, where $15 billion dollars in education money is siphoned into bankers’ pockets year after year for doing very little at no risk. Such monumental corruption would make any Nigerian general very proud.
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Dr. Jemima Pierre is a Black Agenda Report editor and contributor.
Alec Karakatsanis is an attorney with a long history of work as a public defender.
