PRO-CON: SHOULD THE FEDERAL GOVERNMENT LOAN MONEY DIRECTLY TO COLLEGE STUDENTS?
Under current law, taxpayers provide as much as $9 billion each year to subsidize guaranteed student loans issued by banks.
The banks earn profits on the interest; if students default, taxpayers take the loss, not the banks.
President Obama wants to eliminate the subsidy for banks and use that money to help poor and middleclass students and adults attend college.
The president wants to lower maximum monthly payments for student loans from the current 15 percent of income to 10 percent.
Under our contract, the high-performing companies will get more business over time while poor-performing companies will get less. The market will play, and students and taxpayers will win. Arne Duncan, U.S. education secretary, for The Washington Post
Having just retired after almost 35 years as Duke University’s director of financial aid, I remain interested in the debate over college loans.
The Obama administration has proposed to eliminate all private student lenders. This would be a very serious mistake.
Eliminating private lending will cost students money. As currently configured, student lending is a competitive market, and private lenders compete on price and service. Over time this has saved borrowers money by reducing their costs of borrowing.
In a market in which the federal government is the only lender, eliminating competition will lead to a reduction in services to students. In a competitive loan market, students can choose a lender based on price and the lenders’ array of services.. James A. Belvin Jr., Raleigh (N.C.) News & Observer