Going to College? Watch Out for Bush's Bandits
A scandal over privatization of student loans has all the hallmarks of this administration's worst habits
For those of us here with children of 17 or so, it's angst time: where does he or she go to college, and will they get a place?
More than a year before high school graduation, the first scouting visits have started to possible campuses, and the first serious worries surface about the Scholastic Aptitude Test. This is the dreaded SAT, the US equivalent of A-levels, whose points score is the basic determinant of whether you get in.
At the best of times, the passage from high school to college (what we call university) is one of the great transitions of life here - the point at which the coddled American childhood gives way to the competitive rigors of the real world. Maybe our schools are tougher, or our universities less demanding. But somehow in Britain it's just not as big a deal.
And that's only the start of it. Every day you read a scary article about a tidal wave of baby boomers' children heading for college. Will there be room for your own? Then there are those figures showing that any halfway decent college receives many times more applications than it has places: not wholly surprising, given that most students apply to three, four or five colleges.
It is all a pretty stressful business - and the last thing a student needs is the current grubby scandal involving student loans. If you do win a place, will you be tricked into paying over the odds for a loan to pay for it? Britain was in uproar when the Government raised tuition fees to up to £3,000, but college in the US is vastly more expensive. State universities are fairly cheap, with tuition around $10,000 (£5,000). But private colleges are another matter.
Tuition, board and lodging at Harvard will set you back $44,000 a year -$176,000 for a standard four-year course. Even a modest liberal arts college can cost over $30,000 annually. Not surprisingly, fewer children from poorer families are going to college, despite the array of scholarships and grants offered by most colleges. No less surprising, some two-thirds of students graduate with debts averaging $20,000.
Few would dispute the justice of repayable loans for college students. A bachelor's degree can mean $1m more lifetime earnings than a high school diploma. A 10-year or 15-year loan with subsidized interest rates is not an excessive burden. But the process should be as transparent, as honest and as good value as possible for the taxpayer who ultimately subsidizes the entire exercise.
This is a quintessentially Bush administration scandal, of revolving doors, jobs for the boys and rampant corporate welfare, all obscured by a torrent of Republican rhetoric about choice, competition and the universal superiority of the market.
What's happened is that the federal government has cut back on its direct student-loan program, and contracted much of the business to private companies. As might be predicted, these charge slightly more to students - even though the loans are guaranteed by the government - giving the firms, in effect, a license to print money.
In a way, the US student loan system resembles the over-layered health-care system here. Just as America rejects the single-payer health system embraced by other advanced countries, in the name of choice and a fictional "efficiency", so it privatizes student loans. But like the health insurers, the private lenders are in business to make a profit.
And as these middlemen prosper, college education costs grow faster than any other sector of the family budget (with the exception, of course, of health care). Thus inflation-adjusted student debt is up 60 per cent in a decade, and the US student loan business is now worth $85 billion. That kind of money makes people greedy.
In the past few months a host of grubby practices has come to light, largely thanks to the aggressive campaign of Andrew Cuomo, the New York state attorney general. Private lending companies have offered colleges and their officials perks and cash gifts in return for being granted "preferred lender" status. Government scrutiny has been minimal, as the revolving door spins and Education Department officials supposed to keep an eye on proceedings move to lucrative jobs with the loan companies.
For students, relief may be at hand. The Democrat-controlled Congress stirred itself last week to invite Mr Cuomo to deliver a blistering testimony on Capitol Hill. Some lenders and colleges have been named and shamed; the worst offenders may face prosecution. And, just maybe, going to college will be a marginally less stressful business.