COLUMNIST GAIL COLLINS: Student loan reforms make sense

By Gail Collins NEW YORK -- Americans believe that the world works best when consumers have unlimited choice. This is why my corner drugstore offers, by my last count, 103 different kinds of body moisturizers. These are not, of course, to be conf...

By Gail Collins

NEW YORK -- Americans believe that the world works best when consumers have unlimited choice. This is why my corner drugstore offers, by my last count, 103 different kinds of body moisturizers. These are not, of course, to be confused with moisturizers for the face, hand, elbow or foot.

We, the informed shoppers, are supposed to scan the crowded shelves and decide whether our needs will best be met by body oil, body butter or firming emulsion. We will, perhaps, mull the "udder cream" whose big selling point is that it was originally developed for use on dairy cows. Then we select the products that will survive and thrive by voting with our pocketbooks.

This is way too much responsibility.

I have been thinking a lot about choices lately, because I have gotten interested in college loans. The Obama administration is trying to reform the current loopy system in which the government pays private companies to do the lending. The loans then are guaranteed by the government so the private companies are sheltered from loss. Then the government buys the loans back so the private companies can go out and do it all over again.


The White House believes that if it cuts out the middlemen, and just lends money to the students directly, it can save $94 billion over 10 years.

Hell hath no fury like a middleman scorned. The lenders have been rallying the troops, waving the banner of choice.

Citigroup sent a call to arms to its student borrowers, which is currently posted on Talking Points Memo. It warns darkly that if the Obama Armageddon comes to pass, "students and their families will not enjoy the benefits that competition has made possible for more than 40 years."

There is, indeed, currently an army of different providers vying to supply students with financing for their higher education. I'm not entirely sure if the borrowing-money choices are as numerous as the body-hydrating ones, but they're right up there.

This brings us to the critical question of whether endless options actually do any good. "We don't hear students clamoring for choice in lenders. If anything, students and families need simplicity to understand the process and know how to navigate it," said Edie Irons, communications director for the Project on Student Debt, a nonprofit dedicated to making college more affordable.

Since the government-guaranteed loans are regulated by Congress, they have virtually identical terms. The main variation comes in customer service: who has the best Web site or staff.

Most current and former students do not seem to find this as being all that big a deal. What they need to know is exactly how much it will cost to pay back the loan after graduation, information about which they tend to hear less than the Web-site-quality matter.

Besides, the loans often come in pieces, cobbled together from an array of different programs. It would be hard for an accountant to figure out what it all meant, and 19-year-olds are not at the point in life that maximizes attention to detail.


Some students get financial counseling, but it's usually cursory, and it is only mandatory for government-backed loans. "It's not required for private loans, and a lot of students in the worst situation have both," said Robert Shireman of the Department of Education. Shireman was just back from a panel where he met an officer in the United States Student Association, who told him that some of her loans had an interest rate of 19 percent.

The real competition among the lenders is not to win over students so much as the school financial aid officers. This has led to unfortunate but deeply unsurprising instances of thinly disguised bribes and kickbacks.

But even the most honorable officials don't have much time for discussion when several hundred students are clamoring outside their doors. "You walk in, and it's like an assembly line in the bursar's office," said Stephen Marston, who graduated from New York University in 2006 with a degree in psychology.

"They fill out everything for you. Here's Sallie Mae -- go ahead and sign. Payments weren't even discussed."

At the time, Marston was a thousand miles from his home in Texas with an education in finance that began and ended with a $500-limit credit card. He took out two $16,000 Sallie Mae loans to get through school. Thanks to accumulated interest, which began ticking as soon as he signed the papers, his total debt now has ballooned to about $50,000.

He would be the first to admit that no one twisted his arm. He could have gone to a state school in Texas for very little money. But Marston wanted New York. "I thought, 'You only get one chance to experience this.' I got caught up in the adventure."

Walking down the drugstore aisle, he passed up the Jergen's lotion and grabbed for the Bliss Vanilla Plus Bergamot Body Butter. As so many of us do. But at least we get a good look at the price tag.

Collins writes for The New York Times.

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