No more feeding off of desperate students. That's what the House said today in passing H.R.3221, the Student Aid and Fiscal Responsibility Act of 2009. In a huge screw you predatory lenders, from now on the government will be the sole provider of guaranteed student loans.
This is great news for students and should increase access to higher education, hopefully for older students as well.
Such House action is especially welcome since student debt increased 25% in just one year.
The Wall Street Journal:
Under the legislation, all lenders would be cut out of the market for originating loans. There would still be a role for private banks and lenders to bid for a limited number of contracts to service the loans after they are made by the government.
The Federal Family Education Loan Program, wherein the government guarantees loans made by private lenders, remains the single largest source of college loans. Lenders made related loans for students at 4,465 schools for the 2008-09 academic years. Loan volume totalled $74 billion, up 13% from a year earlier.
For companies like SLM Corp., better known as Sallie Mae, the proposed changes are already having an impact. This week, Fitch Ratings downgraded Sallie Mae to triple-B-plus status and called its outlook negative.
Sallie Mae's shares were recently trading down more than 2% at $9.
The bill is projected to save $80 Billion in stopping subsidies to private lenders and funnel $40 billion to Pell grants.
Wow. To read the actual bill text click here. It's quite an overhaul, and amazingly under the radar.
It's long but here are some things already known:
- $10 billion to community colleges
- $8 billion to early learning programs
- $4 billion to public schools for infrastructure, equipment
- $3 billion to increase access plus complete the degree
- $2 billion to minority focused educational institutions
It was just reported that higher education has a bad track record as well as possible interest in not graduating many of the entering students. While the focus will be on scores, no doubt, frankly if one is working full time while trying to go to school, it is no wonder the flunk out & drop out rate is high.
Rep. George Miller also introduced a bill (H.R. 1461), to cover teaching and research assistants as university employees instead of students, which causes them to be underpaid and overworked.
Oh yeah, the bill also cuts off Acorn from federal funds.
This is good
This is good news, as there certainly was no need to have these private lender 'intermediaries' profiting from government-backed loans.I don't know if this bill will necessarily have a significant impact on the cost of education though, which has been skyrocketing out of control to the point where in many cases the cost is not commensurate with the return.
RE:This is good
I concur with your comment as well. It is true that in many cases the cost is not commensurate with the return.I see a lot of students that did not really get a dream job that they wanted and with that said they owed more than what they are making on their job. Well, i am hoping that this would be reviewed by our Government officials that way we will all be in the right track with a positive future.
Private Loan Issues! **HELP**
Wow!!! This is good news for new college students taking bachelors. I am married with 4 kids now and the fourth one just came this MONTH! Having this private loan is really a burden to us financially and also credit wise. Well, back in 2006-07 taking my bachelors degree, i had 2 more semesters to go to take inorder to graduate but unfortunately i think i had accumulated all my federal loans and the President of the financial department advised me to take a private loan(which at that time did not have any knowledge on how it will impact my financial as a student) so i can continue my school and will be able to graduate that year. I was not approved unfortunately (credit & income wise)and would only get approved for the loan amount ($13000)if i have a co-signer. Lucky enough, my cousin did it for me which is really nice of her but is an issue now since her credit is also at risk!!! Right now, i felt that i was deceived by the institution by not advising the right or appropriate way in terms of private loans. It is so frustrating now when i am thinking about it! I am hoping that the law would allow for me to transfer the private loans i owed with sallimae (w/o the interest)to the current federal loan i have base on the federal bill that passed the house this year. Please advise if this option is possible as i am in financial hardship and would really HELP a lot in the long run. Thanks!
I have no idea
I believe that's just future student loans, so what to do with current I honestly don't know. You might call your representative's office to see if they can point to something. A new bill has only passe the House, not the Senate, so you might call your Senator to encourage passage.