Another Bit of Stupidity from Congress Surfacing Now — Moving Student Loan Servicing from the Competent Department of Education to Incompetent and Greedy “Not for Profits”

© 2012 Peter Free

 

27 April 2012

 

 

Avarice and ideology, which by definition attempts to fit Reality into too small a box, generally produces aggravating stupidity

 

Part of the ObamaCare law package contained a requirement that the Department of Education drag in (allegedly) non-profit loan servicers to manage student loan payments that the Department has been (for the most part) efficiently doing itself for years.

 

The change was the result of a lobbying effort mounted by these so-called non-profit loan servicing companies via their political arm, the Education Finance Council, which reportedly spent more than $200,000 on Congress in each of 2009 and 2010.

 

The result has been the same kind of commons-destroying stupidity that I argued against yesterday in Congress’ attempt to destroy the U.S. Post Office.

 

Plutocracy, masquerading as free market ideology, destroys efficient and less costly systems in favor of establishing economically inefficient and more costly ones.  These commons-destroying fiefdoms benefit the few at the expense of the many.

 

 

Non-profit in this case is not really not-for-profit

 

Don’t let the “non-profit” loan servicer description fool you.  Non-profits support everyone who works for them.  They cost money.

 

In 2007 alone — according to information uncovered by Stabile Center for Investigative Journalism at Columbia University and the Huffington Post — these entities brought in $3.7 billion.

 

 

Added administrative layers add costs

 

Non-profit loan servicers are an added administrative layer that the American economy does not need.  The loans in question are already federally owned.  And the Department of Education already has an effective system in place to service them.

 

There is no economic logic to transferring direct servicing out of the Department of Education’s hands to a multiple bunch of less competent and more costly servicers.

 

Not only will the Department continue to have to pay for this shuffle over the long term — therefore not saving government money — but it will now have the added cost of trying to supervise multiple external entities, where before it do everything in-house and according to one unified way of doing things.

 

On the borrowers’ end, we now have the hassle of being jerked around by one or more at least initially incompetent new guys.  Problems for borrowers have already arisen.

 

 

From borrowers’ perspectives — increased aggravation and interest expenses

 

Student loan borrowers know how aggravating it is to be told (or infer) that:

 

(i) one has missed payments when one hasn’t,

 

(ii) have payment amounts, due dates, or interest rates mysteriously change,

 

or

 

(iii) suddenly have no way to contact a human being to straighten the company’s obvious mistakes out.

 

In my case, a new loan servicer made it procedurally difficult to continue making non-due payments that I had previously been making for 10 years.  Why?  The new servicer profits from accrued interest by delaying my terminal pay-off.

 

 

Citation — to an article showing the same unethical tactic in play by other servicers

 

Marian Wang, Student Loan Borrowers Dazed and Confused by Servicer Shuffle, Pro Publica (23 April 2012)

 

 

The moral? — Congress actively destroys the national interest in favor of profiting the top One Percent

 

From Congress’ bribed perspective, the average American is a source of dead-meat pork.

 

Think of it as political cannibalism that benefits self-seekers at the top.