Saturday, September 12, 2009

A Trillion Here, a Trillion There....

With attention focused on the healthcare struggle, we need to be ever vigilant about the government's plans to increase spending of our hard-earned money in a variety of ways.  As usual, the government's cost forecast involves some very creative accounting.

The Wall Street Journal reports in its main editorial today the Obama administration is poised to take over the student loan market.  If Mr. Obama can convince Congress to approve his plan, the federal balance sheet will increase by one trillion dollars over the next decade.

For years, the main means of borrowing for college has been through private lenders who offered government-guaranteed loans.  Private lenders would raise money from private capital markets, make the loan, and pay a small fee to the government for each loan.  The government in turn covered most of the cost of defaults while allowing the private lenders to make a regulated return.

This system started breaking down in 2007 when Congress passed legislation that resulted in returns so low that private lenders could no longer afford to make these loans.  (Do I need to remind anyone that this was the year Democrats took over Congress?)  If Obama gets his way, starting in 2010, private lenders will be barred from making government-guaranteed loans and taxpayers will be supplying approximately $100 billion a year to lend to students

I would urge everyone to read the editorial in its entirety; it's quite revealing.  The WSJ says this legislation is certain to pass the House;  the only chance to stop it is in the Senate.  If it passes, parents will have no choices in borrowing for their children's college education and taxpayers will be footing one heck of a bill. 

1 comment:

  1. I sure get tired of the overspending.

    I am following you through the SGP blogger club. Great blog. Sorry it took so long to get the link up. It works fine now.