February 7th, 2010 | Uncategorized

Hazy future for proposed student loan overhaul

Aggressive private lobbying may stall the passing of legislation overhauling the student loans business, according to an article in Friday’s New York Times.

Under the proposed Student Aid and Fiscal Responsibility Act, the federal government would provide loans directly to students and abolish subsidies given to private lenders. The Congressional Budget Office estimated the legislation would save the government $94 billion over the next decade, money the Obama administration says would be spent on expanding the Federal Pell Grant Program for low-income students.

Last November, amid certainty that the proposed bill would be passed by Congress, Yale administrators announced the University would soon shift to the new direct federal lending program. But since then, the Democrats’ recent defeat in Massachusetts, debate over the health care bill and intense lobbying from private lenders have made the passage of the bill appear less certain.

Yale’s Director of Student Financial Services Caesar Storlazzi told the Times he now questions the merits of a complete government takeover of student loans.

“It really felt like the administration was just shoving this down our throats,” Storlazzi said. Private lenders offer better prices and services, he added.

  • George Recco

    Of course financial aid officers aren’t going to like a government-only system, because that would mean no more big, fat juicy kickbacks, like an all-expenses-paid trip to attend a financial aid “seminar” in Bermuda.

    Don’t believe me?? See for yourself:

    http://www.crainsnewyork.com/article/20070402/FREE/70402009

  • Brash1

    Yes, there have been some abuses. But, if the standard is simply take over an industry that has had abuses or scandals, then who takes over the government. The reality is that there was very little substantive abuse.

    On another note, the reform is very ill-formed. To succeed, the margin on the iterest paid by students who can afford to pay their debt, is used to fund the Pell grants. And, if the cohort default rate climbs, as it will without the debt couseling, financial literacy and other programs offered by the FFELP industry, the margins won’t be enough.

    As proposed, it is a bad idea.

  • George Recco

    >>Yes, there have been some abuses.

    Of course a risk-free, government-subsidized gravy train is going to have “abuses,” because everyone’s dying to get on board. That’s why we need to derail it ASAP.

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