Obama Vows To Reform College Loan System

(AP)  President Barack Obama on Friday renewed his call for the government to stop backing private loans to college students and replace them with direct financial aid to young people, a challenge to a decades-old program with strong congressional support.

Obama's plan to eliminate the Federal Family Education Loan program could save $48 billion for taxpayers over the next decade, but critics warn it could turn the Education Department into a national bank. Lenders and some college officials oppose the proposal, which Obama backed as a U.S. senator and pushed during the presidential campaign.

"In a paradox of American life, at the very moment it's never been more important to have a quality higher education, the cost of that kind of education has never been higher. ... Yet, we have a student loan system where we're giving lenders billions of dollars in wasteful subsidies that could be used to make college more affordable for all Americans," Obama said at the White House.

He was joined by Stephanie Stevenson of Baltimore, Md., a University of Maryland student, and her mother, Yvonne Thomas.

Under that system, students at some colleges borrow directly from the government, while others get loans from banks, non-profits or state agencies who in turn receive subsidies from Washington.

The president's proposal would switch the federal student loan system entirely to direct lending from the government.

Obama acknowledged that the proposal was sure to find critics, given the financial stakes. He warned banks and lenders were "gearing up for battle. So am I."

Republicans are concerned about the costs and even some Democratic lawmakers oppose the switch.

Sen. Lamar Alexander, chairman of the Senate Republican Conference, said ending a successful lending program and giving more power to Washington and Education Secretary Arne Duncan would not help students.

"Arne Duncan, I think, is the president's best appointee. But as secretary of education, he should focus on paying teachers more for teaching well and creating more charter schools - that's his agenda," said Alexander, a former education secretary. "I don't think Secretary Duncan came to Washington to be named Banker of the Year. The Department of Education should not be a $500 billion national bank."

Higher education groups are divided, although a petition against the plan drew signatures from college loan officers around the country. Universities welcome more money for student aid, but about two-thirds of colleges use the subsidized lending program and some want to keep the program.

Lenders are also fiercely lobbying against the proposal, which would end a historically lucrative business.

"The president's proposal to eliminate the Federal Family Education Loan Program will do more harm than good," said Kevin Bruns, executive director of America's Student Loan Providers. "The proposal does nothing to make college more affordable for the vast majority of students who require loans to pay for college."

[tincup356]

If a person does not have good credit, a bank does not loan money to them because there is a risk that they will not be able to pay it back. If the government gets in the business of offering loans to people who cannot pay the loan back then the risk is still there - and it is the taxpayer who will not get paid back. Look at the mortgage industry system for an example - the federal government encouraged loans to people who would not have been able to get a loan otherwise. People eventually found they could not afford to pay those loans and so they defaulted. Now look at the mortgage industry mess.
Posted by songbird21 at 4:37 AM : Apr 26, 2009 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
the part of the story you don't tell is how congress passed laws that allowed the banks to make those questionable loans,,,and make commissions off of them so the more the merrier.... they ALL knew it would end up disaster,,,but they didn't care they ALL got their cut of the pie......Congress giving those SAME crooks our tax dollars is misrepresentation, and misappropriation of funds,,,,,Much like the World's BIGGEST PONZI scheme....SOCIAL SECURITY.......But you don't see them in a rush to fix that either...because they have their own little cushy retirement system...that pays them full salary ...with raises ...for life.,,,,,,,,,,,,,,,,,,Americans are fools for not revolting and making those responsible for all this mess to pay for it , instead of rewarding them with billions.

[tincup356]

Congress has gone crazy,,,,,it would appear that they think if they have checks they have money syndrome.....Someone needs to wake the fools up and make them realize if Americans keep losing jobs, suffer from extremely inflated prices of ALL goods,keep getting gouged by the credit card companies who after getting money from the fed at less than 1% are making over 25% on credit card loans,,,,,,which many people are having to rely on to get by right now....If Americans have to fight all these problems .....How on earth can they afford to keep it up?Corporate America is committing economic suicide, they would have ALL already gone under had they not paid lobby dollars for the rescue,,,and a good deal at that,,,AIG, Citibank,and Bank of America,,,,,paid almost 2 billion dollars last year in lobby money to BOTH parties combined,,,,,,a few months later they received almost 200 billion from congress,,,,,,,,now that is a pretty good return,,,,except it is TREASON.....The people should not be having "Tea Parties"...they should be revolting.

[jwind1]

normal loser libs not posting on this i notice....they see "college" in title and leave it alone

[omnibus66]

Those against changing this program fall into two categories:

1) They are making money off of the current program.

2) They are getting political contributions from those in category 1.

[songbird21]

To Kohlbee:

If a person does not have good credit, a bank does not loan money to them because there is a risk that they will not be able to pay it back. If the government gets in the business of offering loans to people who cannot pay the loan back then the risk is still there - and it is the taxpayer who will not get paid back. Look at the mortgage industry system for an example - the federal government encouraged loans to people who would not have been able to get a loan otherwise. People eventually found they could not afford to pay those loans and so they defaulted. Now look at the mortgage industry mess.

[songbird21]

Is this the first step for Obama to take over all banks? After he takes over all student loans - wha types of loans are next? What will he do if people default on their loan? Will the taxpayers simply never get paid back? What about the people who don't qualify for his new program? How will they pay for college. The problem is not the existing loan system. I know many people who could go to college if they wanted - but they don't take advantage of the aid that is already in place.

[Kohlbee]

Eliminating FFEL will allow more lower income students to attend college --- it will allow students and/or parents of students, who do not have good credit, to get college loans. It will prevent corporate fat cats from further lining their pockets with college loan SUBSIDIES. Who ever came up with the idea of a corporate subsidy for college student loans was an idiot. It's just a current nightmare for students. Please, please eliminate FFEL> IT SUCKS!!!

[Kohlbee]

FINALLY - Please cut the corporate middlemen who distribute govn't loans ... yes, the direct loans = FFEL loans = govn't loans ..., but voila FFEL has a middle-henchman that charges a 1% higher interest rate and 1% higher "origination fee." School financial aid offices choose ... yes, freely choose ... to participate in the Direct lending program and/or the FFEL program (Schools can choose to "offer/participate" in both loan programs). The Direct Loan program requires more work from the college, and ZERO kickbacks. FFEL = sweet deal $$$ for all, EXCLUDING students. Students instead have been getting screwed ... 13%+ interest rates, high fees (similar to credit cards, etc.), and zero consumre protections. It is similar to the mortgage scandal we are currently experiencing ... scary.

[cbsnewscomme]

And we notice all the subsidies they get when they allow the Military Recruiters to setup an office on campus...sucking in kids to join the military before they get the education that would have told them not to join in the first place. The military is well known for offering kids GI Bill money for their education. How many people do I have to kill to get my free education is the message.

http://my.nowpublic.com/world/fraud-american-university-accreditation-part-i

http://my.nowpublic.com/world/fraud-american-university-accreditation-part-ii

Rev.

[rhs648]

Noticed you DIDN'T mention WHAT kind of "businessman" you might be.
Credit card sales to students?
Pawn shop owner?
Payday loan shark?
IMF Bankster?
Lobbyist?

Come on fess up, WHAT kind of "businessman" encourages and advocates enriching the Banksters at the cost of BILLIONS of TAX DOLLARS unless maybe HE?SHE is GETTING a CUT of that SKIMMING OPERATION?
Posted by homespunlady

You are too far off the wall to be rational.