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Obama plan to slow private loans
President wants to take focus off of banks; UW’s financial officials somewhat weary
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In an effort to help save money and increase college attendance and graduation rates, President Barack Obama is proposing to change the way student loans are distributed nationwide.
Obama’s plan, included in his budget proposal, would end the Federal Family Education Loan Program in exchange for more direct lending to students by the federal government.
Under the current FFEL program, private lenders receive a government subsidiary for every student loan they make, though the loans are still guaranteed by the government. Therefore, even if a student defaults, the bank will still receive a return on their investment.
According to Obama, the banks, serving as the “middleman” are wasting billions of taxpayer dollars each year.
“According to the Congressional Budget Office, the money we could save by cutting out the middleman would pay for 95 percent of our plan to guarantee growing Pell Grants,” Obama said in a speech at the White House Friday, according to The Associated Press. “This would help ensure that every American, everywhere in this country, can out-compete any worker, anywhere in the world.”
Secretary of Education Arne Duncan said the president’s plan will increase funding for loans and other incentives by $2.5 billion over the next five years, while indexing each loan to a rate slightly above inflation.
At the University of Wisconsin, students who receive financial aid do not get it directly from the government, but rather from banks backed by the government, according to Susan Fisher, director of student financial services.
If the president’s proposal passes and all federal loans are made direct loans, Fisher said she is confident students at UW won’t suffer as a result of the change.
In addition to changing the way student loans are administered, Obama’s budget proposal would also change the way federal Pell Grants and Perkins loans are distributed.
The president plans to increase Pell Grant funding by $500 next year, raising the maximum award amount to $5,500. Obama also hopes to change the way the value of a Pell Grant is determined.
Currently, the grants are determined each year by Congress. Obama’s proposal would index the grants at a rate slightly above inflation each year to alleviate Congress from its annual duty.
Fisher said she anticipates an increase in requests for student loans next year due to the large number of students’ families that are struggling financially.
Overall, however, Fischer said she is pleased with the president’s proposal to change the way financial aid is distributed to students.
“I love what he’s doing with Pell Grants … trying to get more,” Fischer said.
But Fischer said she does not agree with the president’s plan to change the way the Perkins Loans Programs are distributed.
Under the current Perkins programs, students who have previously received a Perkins Loan repay their loans into a fund that provides the money for those students currently receiving a Perkins Loan.
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Well said
You really have to admire the chutzpah of Barrack Hussein Obama and his oh so stylish spouse Michelle. Both of the Obamas availed themselves of the government guaranteed student loan programs, racking up large loan bills while in college. Then they made the minimum payments allowed while they were each knocking down salaries of +$100,000. They didn’t pay off the loans in full until after Barry was elected a Freshman US Senator, Michelle was getting paid +$300,000…. and they were +40 years old.
These parasite cheapskates are part of the reason our nation is facing a financial crises. They are the poster children of the entitlement generation. Both of them could afford to pay these loans off early, enabling other truly needy students the opportunity to attend college. But their personal greed and ‘rights but no responsibilities’ liberal philosophy makes cheating the system and the truly needy a national Democrat past time. They and all of the other financially able parasites milking the guaranteed student loan programs endanger the financial stability of the program and the very foundations of our government. They speak of ‘helping the little guy’ but they cheat the system and help themselves at every turn. The Obamas are the antithesis of President John Kennedy’s call to humble national service when he said “Ask not what your Country can do for you. Ask what you can do for your Country!”
I also used guaranteed student loans, to keep myself in college when I had no other recourse financially. I paid the loans off in the 3 years following graduation, denying myself any luxuries like a new vehicle, because I KNEW other deserving kids needed the money also.
That’s what personal integrity and self respect is all about. It’s about doing the right thing, even if it means deferring personal gratififcation. It’s about doing the right thing, even if no one else would know if you chose otherwise. Clearly, this was asking too much of the Obamas and the modern entitled liberal.
Similarly, a recent analysis of the Obama’s 2000 - 2007 IRS tax forms showed that they were spending far more than they were earning while living off of lines of home equity credit to keep their “life style” afloat. http://investment-blog.net/the-obamas-were-in-debt-and-now-so-are-we/ In all probability, if Barry had not succeeded in his presidential bid and immediately capitalized on it with his “book deal”, they could have had to declare bankruptcy when the markets crashed, for their personal financial malfeasance and stupidity.
How ironic that you elected these ethically weak, no integrity parasites to ‘fix’ the financial problems they have had such an active part in creating, through their personal abuse of the student loan system and the home mortgage lending system!
Hope! Change!
Alumni
I wonder how much of this is “payback” for the collection calls that I’m sure Barry had to put up with while struggling to make huge payments on the pittance that a community organizer/agitator earns. How typical of his ilk to want to cut out private, market based providers of services in favor of a government monopoly. With no competition, expect customer service quality to plummet. When the government is the only game in town, you will have to take whatever they dish out. For those of you out there who support this sort of thing, consider this: you’re next! Your industry/business/job will be the next thing Barry and his friends place in their crosshairs, claiming they can do better/cheaper than you. Trouble is, by the time we find out how wrong they are, the damage is done. The private sector workers have been displaced a new bureaucracy is ensconced complete with government employee unions extracting money to buy influence with politicians that prevents the mistake from ever being rolled back.