Tag Archives: DOE

DeVos Strikes Again

Despite the recovery, student loan debt continues to be a “drag” on the economy. As numerous economists have explained, Millennials have not been buying homes (and the furniture and appliances to fill them)at the same rates as preceding generations due to the significant student debt so many of them carry.

Repayment is burdensome enough when the student assuming the debt used it at a reputable institution of higher education, and graduated with a credential that led to employment. But that hasn’t always been the case. For-profit “colleges” making extravagant claims on which they are (knowingly) unable to deliver have ripped off thousands of low-income students–and ultimately, all of us, since those students subsequently default on their government loans.

And then there are the “private” loan servicers, who have gouged other students, and who are protected against loss by government guarantees.

The Obama administration had taken several steps to punish institutions and lenders who  engaged in these practices, and to relieve the students who had been defrauded of all or part of their repayment obligations. But of course, the sympathies of the Trump administration and Betsy DeVos lie entirely with the perpetrators, not the victims.

As the IBJ recently reported,

The nation’s consumer watchdog agency is accusing the Education Department of impeding a lawsuit that could potentially bring financial relief to millions of student loan borrowers.

The Consumer Financial Protection Bureau is suing Navient Solutions, alleging one of the nation’s largest student loan servicers violated consumer protection laws and in some cases caused students to pay back too much on their student loans. But in court filings, the CFPB says the Education Department is refusing to authorize Navient to turn over documents. Without that authorization the federal government, as well as several state attorneys general suing Navient, could find it difficult to show what type of damage the company’s alleged misbehavior caused to borrowers….

Under the Obama Administration, the Education Department and the CFPB agreed to share records and resources in cases of potential violations of student borrowing or consumer protection laws. But after Trump-appointee Betsy DeVos took over, the Education Department rescinded that agreement, calling the CFPB “overreaching and unaccountable” and saying the bureau had no authority to oversee federal student loan servicers.

DeVos has previously acted to protect non-performing for-profit colleges, as Time Magazine reported in May.

Career Education Corporation is one of the companies no longer being investigated by the U.S. Education Department after members of an enforcement office tasked with investigating abuses by for-profit colleges were instructed to focus on other issues, the New York Times reported this week, citing current and former employees. Meanwhile, former executives and consultants from those for-profit institutions have been hired as top advisers to the Education Department under DeVos.

This isn’t a matter of being legitimately “pro-business.” A pro-business administration would help the entire business community by taking steps to reduce the excessive levels of student debt that are burdening economic activity generally, including weeding out the bad actors.

This is a “pro-crony” administration. And if the students suffer, well–they aren’t the political donors whose interests this administration serves.

Energy and the Marketplace

Congressional critics made sure that Americans heard about the “scandal” of Solyndra, the green energy start-up that failed and defaulted on its government loan. But we haven’t heard much about the federal government’s renewable energy loan program since then–probably because there hasn’t been a subsequent opportunity to twist results in order to make political hay.

Since 2005, the Department of Energy has loaned $34.2 billion to a variety of businesses to spur development of clean-energy technology. A recent NPR report notes that– while there have indeed been defaults (amounting to $780 million, or 2.28 percent of the total)– DOE has also collected $810 million in interest payments, for a profit of $30 million.

The default rate on these loans is well below the rate of commercial loan defaults typically experienced by traditional banks, according to data maintained by the Federal Reserve. NPR went back to those who criticized the loan program three years ago, but none of the critics would comment for the record.

Energy Secretary Ernest Moniz pointed out that the loan program had funded the first of five huge solar projects in the West. Before that, developers couldn’t get money from private lenders, but now they can.

“We have to be careful that we don’t walk away from risk, because otherwise we’re not really going to advance the marketplace,” Moniz told NPR.

This is precisely the way government loans are supposed to work: to “prime the pump.” When new technologies are deemed too risky for the private marketplace, when the rehabilitation of depressed neighborhoods makes it impossible to get traditional mortgages–in short, when the private sector is not willing to encourage the sort of entrepreneurial activity that benefits us all–governments can step in and jump-start the process.

Of course, once the pump has been primed–once a market has been established and risk moderated–government needs to withdraw and allow the private marketplace to operate. The problem in our (increasingly oligarchical) system is that industries are happy to continue (excuse my vulgarity) sucking at the public tit. So we end up continuing to subsidize companies that have enjoyed years of obscene profits, are sitting on huge cash reserves and have absolutely no problem obtaining necessary financing.

Fossil fuel companies, for example.

In the United States, credible estimates of annual fossil fuel subsidies range from $10 billion to $52 billion annually. These numbers do not include the significant costs attributable to externalities related to the climate, or to the other environmental and health impacts of the fossil fuel industry. We taxpayers also pay those costs, which are another form of subsidy.

Here’s my question to all the critics who screamed bloody murder about Solyndra and the DOE program generally: where’s your indignation about the immense and counterproductive costs of continued fossil fuel subsidies?