Arne Duncan: Direct Student Loans
U.S. Secretary of Education Arne Duncan explains why direct student loans are better for everyone but the banks, and why the banks are pissed about losing all those government subsidies. I’m siding with college students and direct loans, and will be far*ing in the general direction of the banks and their elderberry-scented mothers.
From the Duncan’s Washington Post article:
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. In other words, working Americans pay while bankers get rich.
Meanwhile, educators, engineers and computer scientists — the backbone of the new economy — face crushing debt from six-figure college tuitions. A study of national postsecondary student aid found that in 2008, two-thirds of college seniors graduated with debt averaging more than $23,000. That number will rise as public and private college tuition costs escalate.
…The Education Department has issued more than $187 billion in student loans since the Direct Loan Program was created in 1993. The number of universities participating in the program has more than doubled, to 2,300, in just the past three years. There is no justification to continue wasteful subsidies to banks. It is time to complete the shift to direct lending.
The president’s proposal, which has passed the House and awaits Senate consideration, represents the ideal hybrid of public investment and market-based management. Through direct lending, we get a bigger bang for taxpayer bucks while using competition and private-sector expertise to improve customer service.
Further Reading:
House Votes to End Subsidies to Student Loan Firms
Bill Ending Banks’ Role in Student Loans Stalls in Senate
Posted by Alexa Harrington
