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Federal student financial assistance programs are “costly, inefficient, byzantine, and fail to serve their desired objectives,” according to Ohio University economics professor Richard Vedder. Fraud is rife and many students fail to graduate and carry heavy debt into their forties. But unlike the federal government, those who receive federal student aid cannot simply raise their own debt ceiling.
Since 2003, defaults on student loans have more than doubled to $67 billion and as of last September outstanding federal student loans totaled $848, exceeding credit-card debt. That has the federal government turning to “an army of private debt-collection agencies” that recovered more than $11.3 billion in defaulted loans and made out rather well for themselves with some $1 billion in commissions. The U.S. Department of Education (ED) provides generous incentives to private companies working directly with the government through state agencies.
Commissions can be as high as 20 percent of recoveries, and debt collectors can earn bonuses, gift cards and foreign travel if they recover enough from borrowers. That has led to “boiler room” tactics that have sparked protests from embattled borrowers in a sluggish job market. Debt collectors put the squeeze even on those whose low incomes qualify them for leniency. “You’re dealing with the federal government,” a collector told one borrower, “you have no other options.” The federal collectors have many options, including armed raids.
Last year agents from the U.S. Department of Education’s enforcement division, the Office of the Inspector General (OIG), raided the California home of Kenneth Wright. The agents broke down the door, searched the house and handcuffed Wright and put him in a police car along with his three young children. The raid, it turned out, was for a student aid issue involving Wright’s estranged wife, who was not there at the time.
The Department of Education said it was a “criminal issue” but did not elaborate. According to their statement, the Inspector General’s Office “conducts raids on issues such as bribery, fraud, and embezzlement of federal student aid funds.” Another ED statement said that the OIG’s new Remington Model 870 shotguns were necessary to combat “waste, fraud, abuse, and other criminal activity involving Federal education funds, programs and operations.”
The federal Department of Education, with a budget of $69.9 billion, is itself responsible for considerable abuse and its very existence signifies waste. Education is the responsibility of the states. The federal Department of Education has only existed since 1980 and was a payoff to the National Education Association, the teacher cartel that endorsed Jimmy Carter for president in 1978. The Department aims to promote student achievement but by the eighth grade American students trail students from Canada on international tests, even though that country has no federal education department. So in addition to waste and abuse the U.S. Department of Education is a failure in its most basic mission.