Saturday, September 19, 2009

Time To Change Student Loan Program

Posted By Shawn Gao

Relationship between federal government and private lenders are going to change. There is no more "heads the corporation wins, tail the government loses” business model played in recession time. New policies of Student Loan Program, issued by the government, is pushing the private lenders out of marktet.
The goverment is making bill which will make student loan program by itself, and wipe out any other private lenders in the industry. Also, if the bill becomes true, Federal Family Education Loan program - also known as FFELP (Under FFELP, a wide variety of private firms make loans to college students and are guaranteed a certain return on those loans, with the government making an allowance payment if the interest paid by students isn't sufficient to meet those guarantees.)will be eliminated.
It was not the beginning of the change. Ever since Clinton years, the government had already been trying to make student loan program directly by itself. "According to the Bush Administration’s own figures, it costs the government four times as much to back private loans as to make the loans itself, and the Obama Administration estimates that getting rid of the subsidies and guarantees will save close to $90 billion." (James Surowiecki) It is no doubtful that high profit time for those private lenders are ending, but bring new conflicts between government and them.
This conflict made private lenders go on strike. Their issues are making student progame by the government would cause 35,000 to 50,000 people lose their jobs in lending industry. Meanwhile, they do not believe that the government could make the business as well as they did in the past time. On the governemtn' side, making the bill would benefit low- income families students in order to make sure that any student in U.S could handle expensive tuition fees while saving enough billions money to government. Just in recent days, "The U.S. House voted 253 to 171 on Thursday to approve the legislation, which would get rid of a popular student loan program and in its place provide for direct government lending."( Michael Collins). if bill becomes true, many students will be benefited by the new changes.

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