Obama on Student Loans: More College Aid; No ‘Middlemen’

Gallery.college2Capping off an historic week that launched the overhaul of the nation’s decades-old student loan program, President Obama said today that no longer will taxpayer dollars be “handed out as subsidies” to bankers and middlemen, saving $68 billion to help needy students.
On Thursday, Congress approved an end to the 45-year-old Federal Family Education Loan Program, which propped up private student lending with federal subsidies.
Colleges and universities are working hard to accommodate the major shift over the next three months as the U.S. Education Department now becomes the chief provider of federal student loans.
By July 1, universities and colleges must have their computer systems hooked up and staffs in place to work directly with the Education Department.
Critics say the action will result in fewer lending options and eliminate the jobs of thousands of private lenders. But the President and proponents of reform say the subsidies to the “middlemen’” bankers should be poured back into increasing financial aid and easing terms of repayment, two primary goals of the reform.
The student loan reform will save taxpayers $68 billion over the next decade by ending the subsidies given to banks and middlemen who handle student loans, Obama said today in his weekly radio address. 
The money saved will fuel expansion of the federal Pell Grant program, he said.  And the legislation will cap college graduates’ annual student loan repayments at 10 percent – down from 15 percent – of their income.
The President also said reform will revitalize community colleges and increase support for “Minority Serving Institutions. “
“Year after year, we’ve seen billions of taxpayer dollars handed out as subsidies to the bankers and middlemen who handle federal student loans, when that money should have gone to advancing the dreams of our students and working families,” Obama said. “And yet attempts to fix this problem and reform this program were thwarted by special interests that fought tooth and nail to preserve their exclusive giveaway.”
About 2 in 3 high school graduates take out loans to pay for college.  The average student ends up with more than $23,000 in debt.  By 2014, graduate’s annual student loan repayments will be capped at 10 percent of his or her income. 
Obama projects that an additional 5 million Americans will earn degrees and certificates over the next decade at community colleges – “the career pathways for millions of dislocated workers and working families across this country.”
“These schools are centers of learning; where students young and old can get the skills and technical training they need for the jobs of today and tomorrow,” the President said. “They’re centers of opportunity; where we can forge partnerships between students and businesses so that every community can gain the workforce it needs.  And they are vital to our economic future.”

One thought on “Obama on Student Loans: More College Aid; No ‘Middlemen’

  • June 30, 2010 at 9:15 pm

    I’m glad that the government is trying to do something about student loans. I am having a rough time with Sallie Mae. I had to call the Dept. of Education to get help. Sallie Mae won’t let me switch to the IBR program from deferment until it runs out so interest is accumulating. The Dept. of Ed. agreed with me that I should be able to but it is taking forever to get results. Thankfully when my son is older he won’t have to go through the hoops with the loan servicers and their crap.

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