Over the last few years, there have been growing concerns about the way the federal student loan program was set up to protect private lenders from risk – effectively guaranteeing profitability backed by taxpayer funding. There have been a few pieces of legislation to cut back on some of the excessive student loan profit, but Obama is now talking openly about a solution that would completely eliminate the subsidies for private banking interests. A year ago, I would have called such a proposal politically impossible!
Of course, Obama cannot change the legislation that authorizes and funds the current program – only Congress can do that. Many political analysts still expect the large student lenders to protest Obama’s plan and attempt to influence legislators with renewed lobbying efforts. While I am not a fan of that current system, they will certainly put forth the argument that the program has increased total college enrollment in America since its inception.
Another question that will need be answered is how the government will establish an administrative service to review loan applications, distribute funds, and collect repayments. It is quite possible that these functions could be added on to the existing bureaucratic institutions: FAFSA and the IRS. Since FAFSA already reviews financial aid applications and determines student eligibility, not much will have to change over there. Likewise, the IRS already deals with collecting payments from citizens and it may not take too much modification for them to establish payment procedures for public student loan debt.
The total amount of savings for the taxpayer can only be determined in retrospect and there are no preliminary estimates of transition costs. In the long run, this may actually help students save money on college tuition by keeping costs in check and not forcing said students to finance the lifestyle of banking executives.
May 17th, 2009 at 2:15 pm
Greatly written post here! I think Obama is going in the right direction of what he wants to do with our Student Loans. Cutting out some of these private companies like Citibank and Chase can mean cheaper interest for kids needing to get a student loan.
September 22nd, 2009 at 8:19 am
This is not a good idea.I can’t believe the government wants to take over student loans.They can put whatever rate they see fit and take away competition.
November 20th, 2009 at 11:26 pm
Great post! I am a current college student, and It is rough out there. Half the kids can’t register for next semester because lack of funding and cash.
January 14th, 2010 at 7:16 pm
Seems as though its a step in the right direction.
January 21st, 2010 at 8:46 am
MIDDLE CLASS GETS NO GOV GRANT PER FALSA FORM. GO TO WAR AT 18 NO COLLEGE LOANS WITHOUT A COSIGNER. OUR SON EAGLE SCOUT HONOR SOCIETY WORKS AT COLLEGE 2 YEARS 2 SUMMER JOBS 7YEARS AT 1 SUMMER JOB AND MIGHT GET KICKED OUT OF COLLEGE 3,000 DUE JAN 26 – TOTAL 5,900 APRIL NO RELATIVES PLEASE HELP HIM 302 644-1319 DEPRESSED MOM DIANE
April 12th, 2010 at 3:57 pm
Most of the countries where such functions are with the government agency, face high level of inefficiency and corruption. Everything said and done, taking things from private company to government’s ambit sounds more like communism to me. This may be a case of the pendulum swinging to the other extreme.
May 2nd, 2010 at 6:12 pm
Most of the countries where such functions are with the government agency, face high level of inefficiency and corruption. Everything said and done, taking things from private company to government’s ambit sounds more like communism to me. This may be a case of the pendulum swinging to the other extreme.
July 6th, 2010 at 6:37 pm
Interesting article, I think Obama is going in the right direction of what he wants to do with our Student Loans.
July 27th, 2010 at 5:42 am
This may actually help students save money on college tuition. Useful info, I’ll post a link to you in my blog.
December 22nd, 2010 at 9:20 pm
As a recent college student, its a good sight to see them tackle the rather absurd college loan situation, improve it and make it more efficient…
January 11th, 2011 at 7:56 pm
This may actually help students save money on college tuition. Useful info, I’ll post a link to you in my blog.. As a recent college student, its a good sight to see them tackle the rather absurd college loan situation, improve it and make it more efficient…
February 25th, 2011 at 2:03 am
Education is becoming costly and surely obama is doing the right thing I wish that other countries also take note of this and try to improve the level of education by reducing the fee spent on that. It will bring welfare of both student and the country.
September 25th, 2011 at 8:23 am
obama takes this great idea fo this student loan reform. go for it.