May 29, 2012--"Shop Around"

At a recent town hall session, Mitt Romney was asked about the bill stalled before Congress that, if passed, would keep student loan rates fixed at 3.4 percent rather than, as of July 1st, doubling.

He hemmed and hawed for a few moments before suggesting to the student questioner that if he didn't have the money to go to college, rather than expecting the government to pay for him, he should "shop around" to find a college he could afford. Presumably a technical or community college. Romney did quickly add, that if you serve the country by joining the military then "of course" it was all right for the government to provide financial assistance.

Not surprisingly, he didn't talk about how neither he nor any of his five sons had to do any shopping around for a less expensive college nor did he or they have to join the army, putting their lives and bodies at risk in order to get any help from Uncle Sam. (Incidentally, none of the six of them for patriotic reasons opted to join up.)

Then late last week, to show he cares about education, not just making money and allegedly creating jobs in the process, he issued a 35-page white paper and made a speech about schooling.

About what to do to improve public education there is not much difference between Barack Obama and Mitt Romney. They both continue to cling to policies that have not been proven to work--actually, that have been proven not to work: Vouchers, charter schools, and high-stakes testing is their answer to how to reduce educational inequality.

Vouchers to help low-income children pay for private schools have been around for many years and all careful assessments of whether or not they contribute to closing achievement gaps indicate that low-income kids attending private schools with vouchers do not do any better than those "left behind" in public schools. And rigorous assessments of how well charter schools do sadly indicate that not only do they drain talent and resources from other public schools but about a third of their students are more likely than comparable students not enrolled in charters to do poorly. It looks as if charters in too many instances have a negative impact on student attainment.

But persist Obama and Romney do in insisting that this is the way to go to improve public education.

However, one important thing they do not agree about is what to do about federal government guaranteed college student loans.

Though kicking and screaming Romney finally came around to the view that is is not a politically good idea to allow rates to double to 6.8 percent while mortgage rates hover just below 4.0 percent and banks are paying less than 1.0 percent on CDs, he does want to re-privatize college loans.

A bit of student loan history--

Before Obama took office the government loaned banks the money to make loans at very low rates--about 1.0 percent. The banks in turn made student loans recommended by colleges' financial aid offices--in other words, the banks did no due diligence whatsoever before issuing the loan checks. Thus, they incurred almost no administrative expenses.

Interest accrued during the four college years and after graduating students paid the banks back at rates ranging up to 6.0 percent per year. More than 95 percent of students paid back their loans in full. In those cases where they defaulted, the government paid what was owed plus interest back to the banks. Thus, these loans were called "guaranteed"--the students weren't guaranteed the loans but the banks were guaranteed the profit.

In sum--the banks got essentially "free" money from taxpayers via the federal government, they cut the checks after doing no diligence, and they were guaranteed payback plus a good return on their "investment."

Sound like free enterprise to you? Sounds like a version of socialism to me.

Obama changed all that. The banks were cut out of the picture--as was their automatic profit--and the money saved by the Department of Education making the loans (at a savings of about $6.0 billion a year), was pumped back into the financial aid mix. As a result lowest-income students who were eligible for Pell Grants saw the maximum allowable grant more than double. Which helped assure that like the Romney boys they too would not have to "shop around" for low-cost higher education.

From his Bain Capital days, where working the tax system via special loopholes (more corporate socialism) was the basic MO and low-cost government money was used to leverage buy-out deals, Romeny wants to bring back the same kind of taxpayer-subsidized system to, as he puts it, get the government out of the student loan business.

And, as he now thinks it alright to keep student loan interest rates at 3.4 percent, he and his Republican colleagues want to "pay" for that (getting "only" 3.4 percent rather than the previously preferred 6.8 percent), according to the New York Times, by "abolishing an Obama adminisration preventive health program."

This kind of approach is right out of the Ryan Budget playbook--take your pick: do you want students to be helped to pay for college or do you want to help people get annual medical checkups?

You choose because you can have both.

This is a literal, vivid example of what America would look like under a Romney-Ryan administration.