EDITORIAL: Academic malpractice

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In the recent annals of senatorial vote-buying, there have been the Cornhusker Kickback and the Louisiana Purchase. Now make way for the Bismarck Earmark.

Sen. Kent Conrad, North Dakota Democrat, seems to be demanding a sop for the Bank of North Dakota to guarantee his support for President Obama’s proposed federal takeover of the entire student-loan industry, known as the Student Aid and Fiscal Responsibility Act. The senator is willing to impose this awful idea on the rest of the country so long as North Dakota’s own program is spared.

Sen. Patrick J. Leahy, Vermont Democrat, is seeking additional exemptions, as is the Education Finance Council, which is a trade association for the industry’s official lenders. Several of these state-specific “nonprofits” have been embroiled in various scandals, including the Iowa Student Loan Liquidity Corp., which coincidentally is in the home state of Tom Harkin, chairman of the Senate education committee and the bill’s prime sponsor.

These special favors are galling because they’re being granted as the Obama administration pursues a scorched-earth campaign against most of the private lenders that have provided the bulk of college student loans for many years. Traditionally, about 75 percent of colleges have administered most of their student loans through private companies, backed by federal guarantees in the Federal Family Education Loan Program. The other 25 percent of loans come through the Department of Education’s Direct Loan Program, created 16 years ago, which is the education version of health care’s “public option.”

Yale University’s Chief Financial Officer Caesar Storlazzi told the New York Times that colleges and families think the private program provides “better prices and services” but that “it really felt like the administration was just shoving [the government direct-loan program] down our throats.” Indeed, liberal lawmakers for years have been trying to elbow the private lenders out of the way.

As usual, congressional hypocrites will exempt powerful nonprofits in their home states, especially those with big lobbying budgets. For those private lenders, the bill provides what the Huffington Post Investigative Project calls “the equivalent of no-bid contracts potentially worth millions of dollars each.” The Obama administration, eager as always to increase government power while punishing anyone who makes a profit, seems perfectly willing to permit these back-door payoffs.

From a policy standpoint, the entire bill is a bad idea because it takes away consumer choice. By the standards of ethical government, the legislative sausage-making undertaken by Mr. Conrad and Mr. Harkin smells particularly rancid.

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