Exit the middle man

The health-care reform legislation Congress approved this week achieves another of President Obama's goals: an overhaul of the federal student loan program.

The legislation substitutes an expanded direct government loan program for the decades-long, highly profitable system in which banks got government subsidies to issue loans with minimal risk because they were largely guaranteed by the government.

Eliminating the middle man seems a no-brainer, but the banks fought fiercely to retain their stake and Republicans railed about another government "takeover" at the hands of the Obama administration.

Those putative budget hawks should focus instead on the budget savings of $61 billion over 10 years projected by the Congressional Budget Office. About $40 billion of those funds will be redirected to higher education, chiefly in an expansion of Pell Grants to needy students.

The reform, popular with House Democrats, was a late addition intended to make the health bill more palatable and, because it was part of the reconciliation process, Senate Republicans were barred from killing it with a filibuster.

Considering the low risk to lenders and the high profits they reaped from making student loans, the new program is less a "government takeover," than the end of a sweetheart deal costly to taxpayers.