DeVos action hurts borrowers of student loans

Education Secretary Betsy DeVos has withdrawn Obama administration guidance that would have required the companies that service federal student loans to accept consumer-protection clauses as part of their new contracts.

But if the servicers don’t want to serve borrowers, maybe Congress should remove the servicers from the system.

Because people who take out student loans can’t always repay them on schedule, federal law allows borrowers to make or skip payments based on their income. But the rules are complex. And borrowers not only have to work with their servicers to get on the right plans, they often look to their servicers to tell them what options they have. Yet the Consumer Financial Protection Bureau has caught servicers losing track of paperwork and giving out inconsistent information.

The Obama administration said that in awarding new loan-servicing contracts — the current ones expire in 2019 — bureaucrats should consider the servicers’ past performance. And it said the contracts should include consumer protections.

The Obama team was obviously right. Why have contracts expire if renewal won’t depend on performance? And since the student-loan system exists to help borrowers pay for their education, not to make a profit for the lender (the federal government), borrower service is a big part of what the servicers are being hired to do.

Yet a lobbying group for the student-loan servicers complained that even under the current contracts, they had been subjected to new requirements and given inadequate compensation.

And DeVos appears to be siding with them against the millions of Americans who owe student loans. This is the second time she’s done that; she also dropped an Obamaera rule designed to protect borrowers who default. That’s unfair.

If the companies aren’t willing to take responsibility for customer service, Congress should look for alternatives. Perhaps the Education Department can administer the loans itself. Or perhaps the IRS, which has experience getting people to pay based on their income, should do it. One way or another, the government must make the student-loan repayment process work for the people caught up in it. — Pittsburgh Post-Gazette, The Associated Press

With Pennsylvania’s fiscal shortfall perhaps topping $1 billion, the GOP-controlled House’s budget would eliminate $56 million-plus in corporate welfare from general fund spending. But with overall corporate-welfare spending at $800 million, cuts also should be made beyond the general fund. The $250 million Race Horse Development Fund is an obvious target.

The fund “primarily finances purses (prizes) for horse races,” notes Commonwealth Foundation senior policy analyst Bob Dick. One reason to eliminate it — as the Tribune-Review reported in September 2015 — is how much of that prize money benefits out-of-state horse owners, including Sheikh Mohammed bin Rashid Al Maktoum, the United Arab Emirates’ billionaire vice president and prime minister. The state’s Independent Fiscal Office has since “found nearly 30 percent of all prize money was spent outside of Pennsylvania,” Mr. Dick says.

All that corporate welfare hasn’t done much for Pennsylvania’s horse racing industry. A state Gaming Control Board report shows it “continues to struggle,” according to Dick, with “attendance, gross terminal revenue, and taxable handle (wagers) ... all down from 2015.”

Horse racing’s constant need for public subsidies suggests it has problems that no amount of money from Harrisburg can fix. It’s not showing much return on Pennsylvania’s prizemoney “investment.” And why prop up this industry when so many others struggle?

It’s time for the Race Horse Development Fund to cross the finish line — permanently.

State should end fund that subsidizes horse racing