The Battle Over College Student Loans Continues February 18, 2010
Paul Partridge on private vs. federal student loans for college
President Obama has called the idea of overhauling student loans and ending government subsidies to private lenders a “no brainer.” But actually this overhaul has many brains working overtime, and it can become quite confusing – especially for those of us trying to figure out the least expensive way to pay for college.
There are of course two sides to every story. In this corner are the private lenders who have funded college loans for years. Many private lenders are lobbying to keep their business alive with Sallie Mae, a publically traded company with $22 billion in student loans spending over $8 million in lobbying in 2009. Private lenders argue that a federal takeover of loans would be hurtful to students and their families because they would no longer receive one-on-one meetings, a myriad of loan options and emergency help to avoid defaults. Private lenders also feel a federal overhaul would equal a government takeover and would leave parent with fewer choices.
In the other corner is the White House and President Obama, who feels that the money saved by cutting out these private lender middlemen totaling $80 billion in the next decade would be more efficiently used by offering more educational programs, establishing a $10,000 tax credit for families with loans, expanding the federal Pell Grants and possible forgiving of debts for public service workers.
President Obama feels the government overhaul would be the first in many steps of improving college education in the United States. The President stated that “no one should go broke because they chose to go to college.” The federal government is also under fire if this plan is implemented because over 35,000 private lender employees will lose their jobs and contribute to the unemployment rate.
At this point all we can do is wait to see how this will all play out; hopefully it will be to our benefit. In these confusing times it is more important than ever to stay educated about the different college loan options and which will work best for you and your family. Financial college advisors are an important part of understanding your financial options and making the correct choices.
