Obama to Sign Sweeping Student Loan Reform Today

Lost among the overheated rhetoric of the recently concluded healthcare debate was the following piece of legislation of significant import to students everywhere.  Tonight, the President will sign the legislation that effectively removes Wall Street banks from their position as middleman on all student loans.  The largest rewrite of federal college assistance programs in four decades, the legislation makes the federal government the originator of these loans.  Before the anti-big goverment people get all scared about “takeovers” consider the following after the jump.  Up until today, the private banking industry (or as I like to call them, the Banksters) originated these education loans (for a fee) but the loans were guaranteed by the Federal government.  This meant that if a student defaulted on the loan, the government repaid this money to the bank.  So the banksters had a sweetheart deal.  They were getting paid to lend to students but they were assuming zero risk because all losses were repaid by the govt. 

Under the new law being signed today, the Federal Government will originate the loans and they fees generated by this lending will be wholly reinvested into programs supporting higher education for the American public, such as the Pell Grant program.  Half of undergraduates receive federal student aid and about 8.5 million students are going to college with the help of Pell Grants.  Since the government was guaranteeing these loans before, there is no new role for the Federal government here.  No “socialist takeover”.  Simply, the Obama administration and Democratic Congressional allies have removed the parasitic middlemen on Wall Street from the equation.  Instead of those loan fees going to pad the already swollen bank accounts of Wall Street execs and the investor class, the fees are now being recycled back into the very educational programs from which they were generated; helping to guarantee the availability of monies for the next class of high school grads to enter into the realm of higher education. 

I cannot think of a better example of why government is necessary and how it is the solution to society’s problems, not (as many have been fooled into believing) the problem itself.

8 Responses to “Obama to Sign Sweeping Student Loan Reform Today”

  1. I agree that this is a good change and it makes sense to be handling this without the wall street middleman. I see several reasons why eliminating them is the right move. It is odd that this wasn’t done initially, although I get it requires a lot more overhead, it seems like it would have been the right move all those years ago when they first entered the student loan business.

    Hopefully, this will pave the way for easier and better loans/rates, which in turn will inspire more people to take on higher education.

  2. Misiri Parker

    I think this was a great Idea by The Obama Administration. The loan reform make sense if your spending less money by taking out the banks and their fees, this mean that the money save could help even more student with loans for school. This is a great time to think about going to school even with this loan reform, Obama says if you go into pubic service after graduating college your loan will be forgiving in ten years, and if you don’t decide on public service the loan will be forgiving in twenty years. I defenitly agree with the president when he say’s no one should go in the poor house just to send their children to college.

  3. Katie Von Mosch

    I am so glad that the government has decided to take over this role for financial aid. I am a student that has received a Pell Grant and would not be able to go to school without one. Removing the middle man that added additional fees to lending money to students makes it easier for more students to go to school and also to stay in school.

  4. I used to work with Federal Student Loans. By doing this will cause a lot of people without jobs. Right now I fill that we need to keep jobs instead of getting rid of them.
    I know that these companies still has their private loan but that is still a very low portfolio. The majority of these jobs are Stafford, Unsub, Plus, and Perkin Loans. These companies will go bankrupt. I guess this is another example where the government thinks of their self instead of others.

  5. Wendy Davidson

    I like the idea that the government is stepping in and taking over the student loan process from the banks. This means that more and more students will be able to have access to these loans to further their education. I think the government is doing a very great thing by taking the fees and putting them back into educational programs. Long live higher education!

  6. Robin McFadden

    I love that the bank are being taken out of this equation. Since the federal government is the one backing the loans if someone defaults on them, why is the bank needed? Now the government is reinvesting the fee that they charge to may it a fully benefical process. I’m sorry it took this long, but I am not sorry it happened. Maybe this will inspire more people to continue their education. We can only hope.

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