A battle over higher education loans
is coming to a head as Democrats consider including the ill-titled Student Aid
and Fiscal Responsibility Act in reconciliation legislation. In one corner, we
have private education loan lenders who enjoy the generous subsidies and loan
guarantees provided by Uncle Sam. In the other, we have policymakers who want
to cut out the middleman by having the Department of Education provide direct
loans.

The additional revenue would be
collected from those who did not qualify for assistance through financial aid.
According to Ramon, those that are covered under financial aid will not be
affected by any increase and will be given a fee waiver, provided they meet
certain requirements.

The following
are some key points from the essay:

• The effect of subsidy programs, in part, is to
  impose taxes on blue collar workers—who have not attended college—to pay
  for the tuition of future white-collar professionals. Why should the
  government subsidize future high earners at the expense of average working
  people?

• Federal <a href=
  http://www.estudentaid.com/>student
  aid</a> programs transfer wealth from taxpayers to
  academic institutions. That’s because the rise in student subsidies over
  the decades appears to have fueled inflation in education costs. Tuition
  and other college costs have soared as subsidies have risen. College cost
  inflation induced by student aid probably hurts low-income families—the
  people that federal aid was supposed to target—more than others.

• Federal aid has probably helped increase
  student enrollment to student aid, but many of those additional students
  may not have been ready, or suited, for college. This is evidenced by the
  rising shares of college students who require remedial work, and the fact
  that institutions have lowered their standards to adapt to the rise in
  second-rate students.

• Increasing top-down control and subsidization
  of higher education from Washington
  is creating a threat to the strength of the American system for <a
  href= http://www.estudentaid.com/>student
  aid</a>. As we have seen in K-12 education, the growth in
  federal subsidies is usually accompanied by calls for more oversight, micromanagement,
  and rising levels of red tape imposed by Washington.

• Federal student loan and grant programs have
  been subject to waste and fraud for decades. The Pell grant program (which
  SAFRA would enlarge) costs taxpayers hundreds of millions of dollars per
  year in fraud. Another ongoing problem is the high default rate on student
  loan programs to growth of student for higher education student aid.