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Friday, March 26, 2010
Law - Revamping of Student Loans is Final
Updating this ILB entry from March 24th, David M. Herszenhorn and Tamar Levin report in the NY Times in a story that begins:
Ending one of the fiercest lobbying fights in Washington, the Senate voted Thursday to force private commercial banks out of the federal student loan business, cutting off billions in risk-free profits in a sweeping restructuring of financial-aid programs that was included in — if overshadowed by — the health care package. The House [concurred] later Thursday.For 45 years, commercial banks like Sallie Mae and Nelnet have made loans under the bank-based loan program, receiving guaranteed federal subsidies to loan money to students, with the government assuming nearly all the risk.
Democrats have long denounced the program as a form of corporate welfare that fattened the bottom line for banks at the expense of students and taxpayers.
“There is no service that is being provided by the banks any more,” said Representative George Miller, Democrat of California and chairman of the education and labor committee. “The lenders ran out of services to provide to justify their costs.”
The legislation substitutes an expanded direct-lending program by the government for the bank-based program, directing $36 billion over 10 years to Pell grants, which are aimed at students from low-income families.
Overall, the Congressional Budget Office said, the new lending approach will save taxpayers approximately $61 billion over 10 years. Roughly $40 billion of the savings will be redirected to higher-education. In addition, education programs will get an additional $10 billion from the health-care reform package.
But allies of the student-loan industry attacked the overhaul as a government takeover of the federal student loan business.
Posted by Marcia Oddi on March 26, 2010 08:04 AM
Posted to General Law Related