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Banks lose, taxpayers and students WIN: Obama's loan change





handfleisch
http://www.msnbc.msn.com/id/36014592/ns/business-us_business
Quote:

WASHINGTON - Banks and other private lenders are about to lose a $70 billion-a-year student loan business, part of a massive overhaul of college assistance programs that has received an unexpected boost from President Barack Obama's health care success.

Industry lobbyists have watched helplessly as Democrats and the Obama administration appear on the verge of shifting student lending from private banks to the federal government.

Under the measure, private banks would no longer get fees from the government for acting as middlemen in loans to low- and middle-income students. With those savings, the government would increase Pell Grants to needy students and make it easier for workers burdened by student loans to pay them back.

The bill would mean the loss of billions of dollars in business to student lending giant Sallie Mae as well as large financial institutions such as Citigroup, JPMorgan Chase and Bank of America.



Here's common sense reform that shows the Obama admin can make big positive changes that the major banks and other financial institutions don't want. Given the power that money has in US politics, this decision is really courageous. It looks like a decision made on its merits for the good of the country to help students afford college, done despite political pressure from lobbyists and corporations. Surely Obama gets kudos for this, no matter what your politics.
deanhills
I'm completely dumbfounded by how the legislation was introduced through the back door of the Health Reform Bill. Like a Trojan Horse? What have student loans got to do with Health Reform, and are the people really going to allow legislation to be administrated in this chaotic and unsystematic fashion?

The Washington Post ran an interesting article: Revamped student loan bill tucked into massive health bill on how legislation like this becomes so disjointed that in the end it does not even satisfy the architects of that Bill:
Quote:
The endgame of massive pieces of legislation like the current health care/student loan bill are a politics junkie's dream — and many a policy wonk's nightmare. The kinds of compromises that are typically required to win last-minute votes, meet budget requirements, and get a measure over the finish line often necessitate decisions that leave nobody — even those making the choices to get the deal done — entirely satisfied.


Quote:
But while Duncan and Democratic Congressional leaders heralded the legislation as an unprecedented chance to redirect money that currently flows as subsidies to student loan providers into aid to make college more affordable for students, even they had difficulty masking their disappointment at the whittled-down version of the measure. Delays in considering the legislation and budget realities had radically transformed what had once been seen as an opportunity to spend twice that amount — in excess of $80 billion — and use the money to propel changes in how colleges operate, through a series of accountability provisions and new programs.

In the end, to satisfy budget requirements and win over skeptical deficit hawks in their own party, Democratic leaders wound up directing a total of $19 billion (of the $61 billion in revenues that the student loan shift would produce over 10 years) to reduce the deficit and help pay for the health care portion of the legislation.

Although the ideas of health care reform and loans to students are good ones, I have no doubt at all that the implementation of this disjointed and clumsy dinosaur of a Bill is going to have severe nightmares for the administration and implementation of it. The administration and implementation may gobble up many more billions that in the end may not find its way to student loans but instead vaporize in the cost of bureacracy.
ocalhoun
Better yet, let the government get out of the student loan business completely. How much money would that save?
deanhills
ocalhoun wrote:
Better yet, let the government get out of the student loan business completely. How much money would that save?
According to the article I quoted above, the interference of politics has already cut more than half of what could have been available for the student loans, so add the cost of Government administration and you are so right about it all. The students may be lucky if they get 20% of the original figure of $80-billion that had been bandied all over the news.
jmi256
deanhills wrote:
ocalhoun wrote:
Better yet, let the government get out of the student loan business completely. How much money would that save?
According to the article I quoted above, the interference of politics has already cut more than half of what could have been available for the student loans, so add the cost of Government administration and you are so right about it all. The students may be lucky if they get 20% of the original figure of $80-billion that had been bandied all over the news.


Agreed. I think Obama should get kudos for trying to fix a ‘broken system’, but I’m not sure that the answer to a broken system created by government-run bureaucracy and inefficiency is more government-run bureaucracy and inefficiency. If the government created this problem, does anyone really think they can fix it? The better solution would be for the federal government to get out of the way rather than embedding more bloat and hidden provisions into a healthcare bill that is already poised to run up premiums and drive up taxes instead of reducing the actual costs of healthcare.
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