Skip to comments.Government takeover of student loan industry appears to be moving forward using pending budget bill
Posted on 01/21/2010 5:25:00 AM PST by tunedin
(CNSNews.com) A bill currently before the Senate would empower the Obama administration to nationalize the student lending industry, eliminating the federally subsidized private loans millions of university students rely on to finance their educations.
The Student Aid and Fiscal Responsibility Act currently being considered by the Senate Health, Education, Labor, and Pensions (HELP) Committee would eliminate the Federal Family Education Loan (FFEL)program.
(Excerpt) Read more at cnsnews.com ...
Did this bill originate in the House?
This will be the biggest scam ever. The Zero gets to hand out BILLIONS in free money to all the parasites in the country under the guise of student loans. All they have to do is ask................
...”This will be the biggest scam ever. The Zero gets to hand out BILLIONS in free money to all the parasites in the country under the guise of student loans. All they have to do is ask................”
This needs to be stopped. Keep on getting the word out. They are asking to raise the debt ceiling this a.m. which is an action hurting every American. Spending needs to be cut, not increased and especially not increased in an area where money can be squandered so easily.
According to the Department of Education, 14.3 million of the 17.5 million student loans were federally subsidized for the 2009-2010 fiscal year. Under Obama?s plan, the government would consume the entirety of this industry - a total of $103 billion in 2009-2010.
Under the current system, the federal government subsidizes private financial institutions in order to entice those institutions to provide low-interest loans to students. Under this arrangement the government sets the interest rates lenders may charge students. In return, the government reimburses lenders if market interest rates rise above the interest rates on the loans - in essence, the government reimburses private lenders if they begin losing money on the loans. In return, the lenders agree to return any windfall profits made from the loans to the government. In other words, if market interest rates fall below the interest rates of the loans, the lenders pay the government the difference. The government also agrees to reimburse the lenders should a student default.
Under the system proposed by Obama, the government would cut private lenders out of the picture entirely, setting the interest rates and collecting payments directly for all student lending.
Whether or not the government saw a profit or a loss from the new, federal loans would depend on the rate at which the government borrows money. For instance, the law currently sets the interest rate for direct loans at a maximum of 6.8 percent. Under Obama?s proposal, if the government can borrow money at a rate lower than 6.8 percent, it would realize the difference as profit.(Snip)
The plan has met Republican opposition, passing the House on a party-line vote in September - 253-171 - and has stalled in the Senate, where HELP Chairman Sen. Tom Harkin (D-Iowa) has said he plans to pass the measure using budget reconciliation. "We've already been instructed by the Budget Committee to do this, so we're going to do it," Harkin told The Hill Oct. 19 when asked about using the controversial budget maneuver.
This will be the template for 2010. Make a lot of contrite sounding public statemens about how you’ve heard the message coming from Massachusetts, but keep sliding in more and more big government behind the curtain.
Quick review....Once a student’s scholarships are applied, they are left with a bill for college (unless they get a full ride). Kids who don’t receive any college scholarships have to pay the retail price of college.
These ffels are low interest federal loans (not grants) and millions of people who do not receive any need-based aid take advantage -(vs. a second mtge, credit cards etc). The poorest of students will get other financial aid packages and have zero college bills....so, this proposal isn’t about hand outs.
College students and parents apply for this federal college financing/aid either directly through federal channels or the SAME aid is applied for via private banks.
O’s suggesting eliminating the power of the banks to lend the government’s money; he wants to channel all applications directly to govt. I believe that the financial stripsearch of the FAFSA form is required before applying no matter if the application goes through the bank or the govt. So, I dont think the govt. learns anything new about the borrower - the govt. is doing business directly with their borrower (a credit-worthy person presumably).
He eliminates certain costs for sure and picks up other costs and staffing - the current net is reportedly a 47 bil govt. savings which i’ve not heard the latest GOP opinion on. Bigger govt. staffing will undoubtedly be a GOP objection, but I’ve not seen enough on what all the objections are to eliminating the private banks role.
I can’t say I trust the banks any more...they’ve already been bailed out, they have tightened lending on decent people while profiting by lending govt. aid; to make money, maybe they should lose the laydown business of financial aid and work for business and treat new borrowers with the business interest they used to have;
I need more info on what the specific pros and cons are and the impact on the banks if they lose these profits of lending govt. money.
Can someone help me out if I’ve not understood this correctly? Could this actually be a good idea for the ROI of a federally funded program?
Third rate institutions have biochemical engineering buildings, olympic athletic facilities, and an adminstrative staff that costs a large multiple of the faculty.
The WHOLE system is just another unproductive scam.
All Einstein’s college had was a blackboard..................
You cannot teach the Algorean hypothesis of global climate and social disaster unless you have full 3-d multimedia presentations capabilty. Surround sound is definitely helpful in recognizing Your Master's Voice.
All Newton and Liebnitz had were quill pens and animal skins..............
Not free money (grants); it’s a loan and has to be repaid.
The issue is WHERE the students/parents apply for the federal loan dollars. The bank is a middleman passing through govt. funds. Govt is subsidizing interest while the student is in college so private banks are getting free business...O wants to service all the govt. loans; as the originator of the cash, payor of the $14 billion in loans’ interest subsidy, I’m not sure why “we the people” shouldn’t service our federal aid we funded through taxes.
Close...the biggest scam ever is college ...a total racket ...bloated everything including their sense of self importance. But, if you don’t go, doors slam in your face....unfortunately corp. America has rewarded the diploma regardless of its fit for use in the industry.
“its a loan and has to be repaid.”
Student Loans: Default Rates Are Soaring :
Defaulting on a student loan is worse than bankruptcy. It marks credit history forever.
At first these were NDSL loans (National Defense Student Loans) Then they were retitled in the early 70's to National Direct Student Loans because the military need was passed (down sizing) and some were offended by the military.
If I remember, these loans were originally managed by the govt but then lobbying by the bankers in the 70/80’s changed that.
“Borrowers having trouble repaying their federally backed loans can call their lender to request that their payments be put on hold until they get back on their feet. Most types of federal loans qualify for “forbearance” — meaning the borrower can suspend payments temporarily but is still on the hook for the interest that continues to build while payments are on hold, which is then amortized over the life of the loan.”
Read the one borrower who said, I don’t want to do that because it’ll raise my payments down the road. So, she just blows off the payment. That is a risk for any lender. Students don’t understand how brutal the default is on their long term credit.
I would be willing to bet that if this passes, the default rate will go nuclear. People will be getting these loans with no intention of ever paying them (us) back. If the Zero or his minions are still in power, they won’t pursue these deadbeats..............
If this bill passes, the government will BE the LENDER....................
The government will be the lender and they will politicize the process. Some applicants will be more equal than others.
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