DeVos mistakenly suggests student loans were federated to pay off Obamacare

Photo chronicle by Julia Schmalz

Education Secretary Betsy DeVos falsely suggested in an interview with Politico that student loan interest payments fund Obamacare’s administration.

In an interview with Politics, Education Secretary Betsy DeVos has falsely suggested that the federal government has taken over 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 educated in the basics of higher education policy. Janet Napolitano, president of the University of California system, previously said The Chronicle that she was to explain to the secretary what a specific federal grant for low-income students – commonly known as the “SEOG grant” – was. “Its learning curve when it comes to higher education is pretty steep,” she said.

Ms. DeVos’ response to Politics came in response to a question from a reporter about why “I’m paying 2.4% interest on my Ford Explorer, but my Navient student loan, I’m paying six and a quarter”.

The secretary responded by saying it was “a good question”. The reporter then asked her if she was planning to do anything about it. The secretary replied:

The federalization of student loans was supposed to help pay off Obamacare. So you’re helping pay off Obamacare, I guess, with your student loans.

“The federal government took full charge of student loans right after the economic downturn. And so… the student loan market has been largely controlled by the federal government. … And, the federalization of student loans was ostensibly to help pay off Obamacare. So you’re helping pay off Obamacare, I guess, with your student loans.

The Education Ministry did not immediately respond to a request for clarification of the remark. Higher education policy experts say his answer is a fundamental misinterpretation of how student aid works. Clare McCann, deputy director of higher education policy at New America, said it sounded like a “real misunderstanding” of what happened when the federal family education loan program moved to direct loans.

The move to a 100% direct loan program happened as a separate provision of the Affordable Care Act, she said, and was not envisioned as a way to pay for it. administration of Obamacare. The Congressional Budget Office estimated that the move, which was proposed before the Affordable Care Act was drafted, saved $ 61 billion by cutting banks. These savings were used to increase the maximum Pell Grant amount from $ 800 to $ 5,550.

“In a very technical sense, I guess you could argue that the savings from the direct loan transfer helped pay for some of the costs of Obamacare,” Ms. McCann said. However, “you would be hard pressed to say that the shift from federally guaranteed loans to federally administered loans affected the control that the federal government actually exercised.”

And the savings resulting from the move have nothing to do with the interest rates on loan repayments, as Ms. DeVos suggested.

Adam Harris is a news reporter. Follow him on twitter @AdamHSays or email him at [email protected]

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