The Republican platform calls for repealing student loan reform so private lenders can get a bigger piece of the pie.

Since health care reform was passed in March 2010, Republicans have railed against the individual mandate and imaginary death panels. But they’ve also been seething over a lower-profile part of the package called the Student Aid and Fiscal Responsibility Act (SAFRA), which made the government the sole originator of federally backed student loans. Critics have called it a government takeover, with Paul Ryan claiming that “they had the federal government, the Department of Education, basically confiscate the private student loan industry.” (For the record, you can still go get a private student loan whenever you want. You won’t be pulled off the street and tossed into the back of an FBI van.)

If Republicans get their way, this dark age of sensible reform and efficient lending practices will soon come to an end. Their 2012 platform declares, “The federal government should not be in the business of originating student loans; however, it should serve as an insurance guarantor for the private sector as they offer loans to students.” In other words, they want taxpayers to assume all the risk and banks to enjoy all the upside. Their big idea for student loan reform is to roll back change and restore a status quo that already wasn’t working.

Most students can’t afford to pay soaring college tuition rates out of pocket, so the government has a vested interest in making higher education more accessible given that it’s a public good and the key to a more productive workforce. Even the Republican platform concedes that much by stating that the government should continue to back private lenders instead of pulling out of the student loan market entirely.

But there’s no obvious reason why this goal is best accomplished by funneling money through third-party lenders instead of issuing loans directly. Before SAFRA was passed, federally backed student loans were administered through the Federal Family Education Loan Program, or FFEL, a public-private partnership in which the federal government subsidized and guaranteed student loans that were originated by private lenders. This meant that banks received taxpayer money as an incentive to keep interest rates low. The government also guaranteed that it would pay back up to 97 percent of the loan principal if the borrowers defaulted, meaning there was little need for lenders to worry about credit risk. That proved an inefficient way to provide loans, but a great way to prop up banks and waste a bunch of money.

In a rare victory for common sense and genuine fiscal responsibility, SAFRA changed the system by cutting banks out of the loop and establishing the government as the sole originator of federally backed student loans. Proponents of the new system have described it as “a plan as simple as the cheesiest local television commercial: The president will cut out the middle man and pass the savings along to you.” This is projected to save $68 billion over 11 years, which should put a smile on deficit hawks’ eternally frowny faces. The bill also caps student loan interest rates and uses some of the savings to invest in community colleges and provide $36 billion in additional funding to expand and increase Pell Grants. Though we still have a long way to go toward tackling the student debt crisis, these are all important steps that will help make college more affordable and accessible to Americans from all walks of life.

Aside from being smart policy, this new approach to providing student aid has the added benefit of making the relationship between that aid and government action explicit. This counteracts the effect described by Suzanne Mettler in The Submerged State in which government-provided benefits are “hidden” by turning them into tax expenditures or laundering the money through private entities. The result is that people often fail to realize that the government is doing anything to help them. Direct lending helps to ensure that “Get your government hands off my Medicare!” doesn’t find a more youthful counterpart in “Get your government hands off my federally backed student loans!”

All of the above explains why SAFRA was a step forward, but it also explains why Republicans want to take two steps back. Their dark warnings of government takeovers and “Soviet-style customer service” are identical to the arguments they’ve used to attack the broader health care reform package and just as dishonest. For one thing, as Valerie Strauss notes, they’re “conveniently forgetting that the government already pays for it so, by definition, it already IS a government program.” For another, anyone who’s had any interactions with private student lenders isn’t likely to miss the warm and welcoming customer service experience. If there’s a problem with one of your loans, working it out isn’t like popping over to the Genius Bar at the Apple Store. It’s more likely to involve making a lot of phone calls and swigging Pepto Bismol while waiting on hold. The government could do a worse job in theory, but it would probably have to work at it.

Other complaints focus on the fact that switching to direct federal loans has forced private lenders like Sallie Mae to cut jobs, but as noted, those people weren’t really doing anything particularly useful. If Republicans want to do a complete 180 and argue that the government should provide make-work jobs, there are far more useful things we could have them doing. If not, these private lenders sound an awful lot like those moochers conservatives like Paul Ryan complain so much about.

Though the Republicans’ desire to repeal SAFRA is sandwiched into a section of their platform labeled “Addressing Rising College Costs,” their solution would benefit banks while providing no help at all to students. In fact, they’d make things worse by slashing Pell grants and increasing spending on the Department of Defense so that we can send more young Americans off to war instead of college. If the GOP wants to style itself as the teller of hard truths, it should start by acknowledging that having private lenders act as middlemen for student loans is pointless and stop trying to backtrack on what little progress has been made on student loan reform.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter @txprice.

Student debt image via Shutterstock.com.

Education is certainly important, but if it doesn't go hand-in-hand with the creation of good jobs, we'll have an economy built on quicksand.

We all know that the key to our economic future is a more educated workforce, right? Here, for example, are the “Guiding Principles” of President Obama’s education policies: “Providing a high-quality education for all children is critical to America’s economic future. Our nation’s economic competitiveness and the path to the American Dream depend on providing every child with an education that will enable them to succeed in a global economy that is predicated on knowledge and innovation.”

Now it’s certainly true that a good education is still the best ticket – other than inheriting wealth – to entering the middle class. In the simplest terms, Americans with a Bachelor’s degree or more earn more than the average wage and those with an Associate’s degree earn less. So it makes sense for us to encourage our children to get a good education. But is the president’s assertion that the path to the American Dream in the new global economy depends on providing every child with a good education true?

As an important new report underscores, if that is the only path we rely on, our economy will come up way short and so will the great majority of Americans who are striving to live the American Dream – with and without a good education.  

In Where Have All the Good Jobs Gone?, Center for Economic and Policy Research economists John Schmitt and Janelle Jones make a simple and powerful point: over the past three decades, the workforce in the United States has gotten a lot more educated and productive, but fewer of us have a good job. The standard that Schmitt and Jones set for a good job is pretty basic: earning the median wage for men of $37,000 a year and having some sort of health insurance and retirement fund at work. Of course, that isn’t a lot of money, and with most workers forced to pick up a bigger share of shrinking health benefits and pensions giving way to 401Ks, not a lofty benefit plan. Which is what makes the results of the study so striking. Even though the typical American worker is twice as likely to have a college degree than 30 years ago, the share of the workforce that has a good job declined, from 27.4 percent to 24.6 percent. The kicker here is that the decline occurred at every education level, although it was worse for those with a scanty education. But even workers with a four-year college degree or better were less likely to have a minimally decent job.  

The CEPR researchers take the data a bit further to make two compelling points. If we had not increased our educational level, it would have been a lot worse: only 17 percent of workers would have good jobs. The second point is that if job quality had kept up with increases in education, then 34 percent of workers would have a good job.

I want to throw one more scary statistic into this brew before drawing the implications for building an economy that will work for everyone: most of the jobs that will be created in the next decade don’t require much of an education. Of the 10 occupations expected to create the most jobs, eight of them require a high school degree or less. There will be almost four million job openings for retail clerks, home health aides, and the like compared with one million for nurses and college professors, the only two jobs in the 10 that require more than a high school degree.

These numbers foretell an economy where even workers with a good education are barely making it and most Americans don’t have a prayer of living the American Dream.

The guiding principle for a different economic path is making the middle class the engine of the economy. Our economic policy must be driven by a commitment to make every job a middle-class job, regardless of the educational level of the worker. That means sharing our economic progress broadly, not concentrating it among a shrinking sliver of the rich.

As the authors of Where Have All the Good Jobs Gone? point out in the first paragraph of their report, we have gotten a lot richer as a nation – 60 percent richer – over the 30 years in which good jobs dissolved. A more educated workforce, and an increase of about 50 percent in physical capital growth, led to a big jump in productivity. If that growth in productivity had been shared fairly, that $37,000 median wage would be a lot higher: $68,000 by one calculation. Even by a more modest measure, if inequality had not increased, median family income would be $9,000 more. By either calculation, if that extra income were in the pockets of Americans – instead of sitting in the investment portfolios of the super-rich and big corporations – the economy would be booming.

There are a host of policy solutions to build an economy in which our growth is broadly shared. A huge step would be to increase unionization. The manufacturing and construction workers of the mid-20th century didn’t have a high school education – they had a union. We should boost pay for low-income workers by increasing the minimum wage and enforcing wage laws so that employers pay workers for overtime and meal breaks and don’t steal their wages or pretend they are independent contractors. We need to use public dollars to invest in job creation, from construction workers to school teachers, all with good wages and benefits. And yes, we should make it possible for many more of our young people to get a good and affordable education. But whether they get that education or not, all workers should get enough to live a dignified, secure life so they can take that path to the American Dream. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

Screaming college grad image via Shutterstock.com.

Citizens shouldn't be seen as merely consumers choosing from an array of options, but active participants in collective decision-making.

Backing Governor Chris Christie and Commissioner Chris Cerf’s unrelenting push for more “high-quality school options” in New Jersey, the Department of Education recently approved nine charter schools to open in September, bringing the total number of charter schools in New Jersey to 86. This move is part of a broader trend toward the marketization of education policy – the incorporation of market principles into the management and structure of public schools, as well as voucher programs to subsidize alternatives to public schools. These market principles include deregulation, competition, and the unqualified celebration of “choice,” all of which are embodied in the charter school movement. Despite claims of greater efficiency, innovativeness, and responsiveness, however, the growing rhetoric around choice needs to be more closely scrutinized before we wholeheartedly jump on the charter school bandwagon.

Market-based school reform is focused on the idea that by structuring schools like business enterprises, we can inject them with stereotypical private sector virtues like innovation and efficiency. According to this view, this is sorely needed because “traditional” public schools are supposedly ineffective. By removing barriers to entry for different types of educational organizations, market-based reformers believe we can incorporate some healthy competition into the state-run system and overcome drawbacks allegedly caused by the state’s monopoly control. This approach positions parents and students as consumers of education, free to choose which types of schools best meet their individual needs and preferences. The rhetoric of “choice” implies that marketization will enhance liberty as well as efficiency.

This approach reconfigures our understanding of what is “public.” While traditional conceptions of public education define “public” according to who funds, owns, and governs the system, under the marketized model public education is considered “public” to the extent that a public made up of individual consumers is provided for. Indeed, this is considered to be one of the great advantages of the marketized model. Whereas public schools are forced to be all things to all people, which requires using what Milton Friedman once called "cumbrous political channels" to try to reach agreement, marketized models will supposedly eliminate messy conflicts and streamline the process into a neat consumer-provider relationship that better responds to individual needs.

There are several problems with this model from the perspective of both efficacy and, more importantly, democracy. First, despite the grand intentions behind marketized programs, they do not get better results on average than traditional public schools. A study conducted by the Center for Research on Education Outcomes (CREDO) at Stanford University found that 17 percent of charter schools reported academic gains that were significantly better than traditional public schools, 46 percent showed no difference from public schools, and 37 percent were significantly worse. Additionally, introducing supposedly tough-minded material incentives to improve teacher performance, such as giving higher "merit" pay to more successful teachers and threatening to fire less successful ones, has yielded no measurable benefits for children and, instead, tends to divide and demoralize teachers.

Other studies have found that the competitive incentives designed to drive innovation in the classroom are not operating as intended. Instead of improving teaching and learning practices, market incentives have driven an increase in schools’ marketing and promotional activities – that is, advertisements that better sell their products. And as marketing is most effective when aimed at specified groups, schools usually beef up their academic achievement statistics by targeting families of higher-achieving students, thereby contributing to increased student selectivity, sorting, and segregation.

Efficiency considerations aside, the real problem with championing marketized models in education and other areas is the damage it does to democracy. We should not be upholding a model based on turning citizens into consumers. Democratic citizenship does not simply involve an individual’s choice from a platter of options. Rather, it requires active participation in collective decisionmaking.

The problem with marketized models is that in the process of providing individuals with private “choice,” citizens are necessarily deprived of public choice – that is, the opportunity to discuss, deliberate, and act in concert with others. While advocates of marketization claim that it eliminates many of the protracted disputes that currently impede the effectiveness of schools, disputes aren’t always such a bad thing from the standpoint of democracy – especially when they deal with matters of genuine common concern like the education of future generations. Even if conflicts do arise, the opportunity to debate and engage in a democratic give-and-take with neighbors is a vital aspect of political education and empowerment. As Alexis de Tocqueville observed in the 1830s, it is only through participation in the exercise of power over collective outcomes, and the practice of thinking about and acting on public issues in public arenas, that people can develop the skills and commitments necessary to be citizens. Removing public education as a site for political education simultaneously removes yet another stake citizens have in our democracy.

Of course, this is not to say that there is no place for anything that is not a “traditional” public school. On the contrary, a variety of independent alternatives can certainly complement a healthy public school system and contribute to diversity and innovation. That’s particularly true when they represent initiatives led by local community members rather than corporate franchises. But that is very different than using public money to undermine and dismantle public education itself as a genuinely public enterprise.

The trend toward increasing privatization and marketization means the increasing disempowerment of citizens. The reconfigured version of “public” advanced by marketized models of education is severely truncated and distorts our understanding of why public education is important. Public education is not simply service delivery. It is also an expression of community and shared responsibility that helps shape the character of a society. We should value public schools not only for educating our children, but also for their role as local institutions where citizens can congregate and practice democracy.

Elizabeth Stokes is a Roosevelt Institute | Campus Network Summer Academy Fellow, co-leading its newest project, "Government By and For Millennial America.

School hallway image via Shutterstock.com.