6th Aug, 2010



Add the college student loan program to Washington’s latest takeover of private enterprise. In yet another government “makeover” or “change” that is supposed to give new “hope” to America, the runaway train engineered by Obama, Reid and Pelosi (all liberal democrats) has again through congressional slight of hand found a way to pass radical “reform” legislation. This is again done without debate or prior committee review and input to screen and protect against such abuse of power.

Remember the wit and wisdom of Ronald Reagan who said, “The scariest words in the English language are, ‘Hello, I’m from the government and I am here to help you.” For decades, the Federal student loan program has respected the role of private banks and other financial institutions in making low interest loans with deferred repayment schedules to help young people finance a college education and improve their station in life. The government’s only role in these “student loans” has been to provide back up in the form of guarantees. Lenders are then willing to make such loans and apply a relaxed set of qualifications for those who are just getting started on their chosen career path.

Until Obama and the current Democrat majority in Congress took over, more than 2000 private companies made student loans. Now, the Federal government has completely taken over that program. Loan applicants must now contact and work exclusively through four government “call centers”. The Feds were previously just the guarantor of the loan and not the source of the funds. No government money was needed or spent unless there is a default. However, under Obama, government just got bigger and free enterprise and individual freedom took the hit. In the midst of double-digit unemployment, more than 30,000 jobs will be lost under this latest government takeover. Why would our government be a competitor and an obstacle to free enterprise? Why must capitalism yield to the creeping tide of socialism that seems to go unchallenged today in our nation’s Capitol?

Peter Hannaford (who was closely associated with President Ronald Reagan for a number of years) has called this latest government takeover — “Chapter 3”. This comes after the $760 billion “stimulus” and the trillion dollar healthcare “reform” elements of the Barrack Obama strategy to create an ever expanding class of Americans who are dependent upon their government. This time, President Obama has taken the 15 million college students who were free to go to one of 2000 different lenders for their loans and dumped them into the Federal Department of Education (which was a Jimmy Carter creation and is long overdue for reconsideration).

Private lenders, banks and some non-profit organizations previously competed for student loans and handled all the details of the loans they wrote. They receive service fees from the Government but Obama now calls these “subsidies.” He claims that eliminating this process will result in “savings”. Since when does the Government save us money by taking something from the private sector?

The Federal Department of Education will now borrow student loan money at 2.8% interest and charge the students 6.8%. The difference between those two interest rates is the new “profit” or “savings” the Federal Government claims they will achieve but that amount is “earmarked” for Obama’s budget busting healthcare reform plan. It seems the enormous deficit they have created is now pushing them to go into the lending business (with our tax dollars). They must find new ways to make money to offset their losses elsewhere. This is hardly the proper role of government.

Senator LaMar Alexander of Tennessee (a former U.S. Secretary of Education) tried to lower the interest rate and amount of profit that the Government is about to generate by going directly into the student loan business. He points out that the Government takeover in this area will “deprive 15 million students of choices, add half a trillion dollars to the Federal debt and throw out of work 31,000 Americans who currently help students with loans”. Human Events commentators have written: “Again we see that Obama’s background is completely void of prior experience in the private sector. He does not understand it and, therefore, mistrusts it and is quick to dismiss it. What reasonable minds would clearly see as a ‘takeover’, Obama continually calls ‘reform.’ The ‘winner’ in all of this is the Department of Education bureaucracy and the public employees union that supports its expansion.”

How did this legislation pass? Obama and his allies in Congress attached the Bill to the unrelated “healthcare reform” legislation that they managed to cram through just before the Senate election in Massachusetts took away their super majority. (A prior article on this site showed how the President advanced his “gay rights” expansion agenda by attaching his sexual orientation/ “hate crimes” legislation to the military budget where it would escape debate and could not be separately rejected). This time, he and his allies threw the student loan takeover into his healthcare reform legislation. These days, anytime there is a piece of liberal legislation steamrolling through Congress, the Democrat majority in Washington is able to throw in any controversial item they don’t want to see separately debated, discussed and voted upon.



Regarding the Federal Department of Education in general, it is well to note how that Department came into existence and the continuing controversy surrounding its operations.

President Jimmy Carter exceeded constitutional authority and expanded the Federal government by creating the Federal Department of Education. The Department’s original budget was $13.1 billion (in current dollars) and employed 450 people. By 2000, it increased to $34.1 billion and by 2007 it doubled and grew to more than $73 billion. The budget request for fiscal year 2011 is $77.8 billion. The Department now employs 4800 people. And yet, all of this spending over 30 plus years has done very little to improve American education. Why? Because the Federal Government has no constitutional authority to involve itself in local public education including school curriculum and employment.

In Utah, the Federal government wrongfully asserts ownership and control of as much as 70% of our public lands. It thus deprives us of not only the full and free use of our land and natural resources but also the income and property tax revenue that would normally flow to our schools and state public education system. Ask yourself why Kentucky or Missouri or Ohio have experienced no such Federal land grab. Only in the West did our government (upon granting statehood) choose to simply keep and hold back some of the territory that our Constitution provides shall be turned over to the states. The West is a glaring unconstitutional irregularity.

Again and again, we see and feel the negative effects of overreaching Federal policies, programs and agencies. Ronald Reagan wisely and aptly identified the problem that now confronts us. He said,


To be continued in part 3



With my wife going back to school for her Master’s Degree, we ran headlong into the government takeover of student loans. The universities, banks and students were all caught by surprise. My wife’s loan started out with a local financial institution and was suddenly derailed so the government could wrap it’s arms around another segment of our lives. So now, if a student needs financial help, their only choice is a government loan at 6.8%.

Who knows what the actual costs will really be after all the paperwork, shuffling and handling by numerous bureaucrats? Who knows how many people or redundant departments have just been created so the government can make money on the backs of needy students?

Ted Phillips

This is outrageous! What can we do to overturn this legislation? To whom can we write and effectively protest?

Our Republican representatives in Washington are our contacts but unfortunately, the same trio (Obama, Reid and Pelosi) that boasts of its power to pass such incredulous and unprincipled legislation stands in the way. Still, Utah voters need to know what’s going on. The best way to stand up to the Federal Government in most instances is to not send similar thinking Democrats to our State House where strong and principled Republican opposition is needed to uphold our states’ rights under the Constitution.

Every time I open my inbox I hear of another way in which this President and the Democratic Congress are taking more and more power and pushing this type of legislation down our throats. I will continue to use my influence as best as I can to thwart this power grab and help honorable men or women into office in November. Thank you for all you do.

The best thing we as citizens can do is to become as independent of the Federal Government as possible.

Start doing on as local a level as possible what the Federal Government programs want to do. If you can dedicate more time and teach your kids exclusively at home, do it!

Use federal programs and services, and even state programs and services (which are often funded by federal dollars) as little as you possibly can. These bureaucracies thrive on budget increases and the number of people they serve. They grow and justify their budget based on previous terms’ expenses and people served. The fewer people using them, the less justification they have to increase their budget and influence.

Save up for your kids’ college educations so they don’t have to borrow anything to go where-ever their chosen path leads them – better yet, start as soon as possible to help and encourage them earn enough to pay for college themselves.

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