In an interview with Politico, Betsy DeVos, the education secretary, falsely suggested that the federal government had taken control of the student-loan market to help pay for the administration of the Affordable Care Act.
The statement reinforces the impression that Ms. DeVos is not schooled in the basics of higher-ed policy. Janet Napolitano, president of the University of California system, previously told The Chronicle that she had to explain to the secretary what a specific federal grant for low-income students — commonly known as a “SEOG grant” — was. “Her learning curve where higher ed is concerned is quite vertical,” she said.
Ms. DeVos’s answer to Politico came in response to a question from a reporter on why “I pay a 2.4-percent interest rate on my Ford Explorer, but my Navient student loan I pay six and a quarter.”
The secretary responded by saying it was “a good question.” The reporter then asked whether she planned to do something about it. The secretary responded:
“The federal government took over student loans completely right after the economic downturn. And so … the market for student loans has been basically controlled by the federal government. … And, the federalizing of student loans was ostensibly to help pay for Obamacare. So you’re helping to pay for Obamacare, I guess, with your student loans.”
The Education Department did not immediately respond to a request for clarification of the remark. Higher-ed policy experts say her answer is a fundamental misreading of how student aid works. Clare McCann, deputy director for higher-education policy at New America, said it sounded like a “real misunderstanding” of what happened in the switch from the Federal Family Educational Loan program to direct lending.
The switch to a 100-percent direct-lending program occurred as a separate provision of the Affordable Care Act, she said, and was not envisioned as a way to pay for the administration of Obamacare. The Congressional Budget Office estimated that the move, which had been proposed before the Affordable Care Act was drafted, saved $61 billion by cutting out the banks. Those cost savings were used to increase the maximum Pell Grant award by $800, to $5,550.
“In a very technical sense, I suppose you could argue that the savings from the direct-loan switch helped to pay for some of the costs of Obamacare,” Ms. McCann said. However, “you would be hard-pressed to say that the switch from federally guaranteed loans to federally administered loans affected the control the federal government had in any real way.”
And savings from the move have nothing to do with interest rates on loan payments, as Ms. DeVos suggested.