Like most Americans, I made sure to catch the tail end of the Betsy Devos confirmation hearing for Secretary of Education. Kidding aside, I’m more stunned with what I didn’t hear than what I did. I checked the transcript as well to make sure I hadn’t missed a substantive student loan discussion. After watching lawmakers ask their questions, I think we’ll have current loan rules around for a little longer than I expected.
Senators Asked Almost No Questions on Higher Education
The Senators seemed to care a lot more about charter schools than they did anything else. I’d say that as a whole, primary and secondary education dominated the discussion. There were also questions about the Americans With Disabilities Act, sexual assault, LBGTQ issues, and religious freedom.
Higher education only came up a couple times in the over three hour Betsy Devos confirmation hearing. Senator Sanders asked Mrs. Devos multiple times if she would support his proposal to make college tuition free for every American, obviously for rhetorical effect. Senator Warren contrasted Mrs. Devos to prior Secretaries of Education, taking issue that she had never managed a $1.3 trillion student loan portfolio. The real total is closer to $1.5 trillion, but who’s counting?
Even Fewer Mentions of Student Loans Happened
There were a couple times when Senators would point out Betsy Devos would have a myriad of conflicts of interest as Secretary of Education. They’re right. She was an early investor in Sofi. She even has a stake in a private student loan collector.
So the only times student loan anything came up was when it was in the context of her conflicts of interest. The Senators did not ask a single substantive question in regards to student loan policy.
Betsy Devos Will Be Keeping Most of Her Educational Investments
Senator Murray of Washington state had one of the few interesting exchanges with the future Education Secretary. The Senator asked in detail about Mrs. Devos’s extensive potential conflicts of interest. After all, Mrs. Devos is a billionaire, and she has a huge amount of investments in a myriad of companies. Many of her investments center on education.
Betsy Devos promised that she will deal with all conflicts appropriately. However, it seems like she will use a similar strategy to what Trump is using. She will move any assets to a family trusteeship and not hold them directly. That way she can hold onto valuable stakes in companies like Sofi and others that will likely be far more valuable by the time she leaves office.
A Good Night for the Status Quo
Here’s my big takeaway from the Betsy Devos confirmation hearing. So little came up about student loan policy, it’s clear that Congress still has no clue what they’ve done to their future fiscal balance sheet by creating programs like PSLF and income driven repayment. At some point, they’ll realize their mistake and curtail these benefits to make them less generous.
However, based on the Senators’ focus on everything BUT student loans, my guess is that the income driven repayment options put in place by President Obama will stay in place for a little while longer (that is, the REPAYE and PAYE plans). If you’re currently on those plans, I’d feel a little better on the lack of any coherent strategy for a complete overhaul of the federal loan system. This is in stark contrast to the clear ‘repeal and replace’ rhetoric that indicates Republicans’ intentions on health care policy.
Hence, yesterday’s hearing is a good sign for the status quo. We will likely see major changes to student loan policy in the next couple years, but I’d expect the Republicans will go after healthcare first and spend most of their political capital on that. Student loan policy will likely be an afterthought.
Also a Great Night for Private Lenders
Betsy Devos is clearly a dream Secretary of Education if you run a private student loan company. She will probably push for a larger role for many of the companies that I have affiliate relationships with on the top right sidebar. They will probably be asked to take on a larger role, particularly for loan origination.
What does that mean for borrowers? Folks taking out loans for dental school and medical school will probably get lower starting interest rates. Those taking out loans for law school or veterinary school will probably get higher starting interest rates.
I’d also expect to see more changes in how students obtain loans in the first place. After that, they’ll overhaul the current state of income driven repayment programs. Clearly though, before they do anything, Congress will have an intense and drawn out fight on healthcare. Education policy, and particularly student loan policy, will take a back seat for the next several months.
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