Ben Miller at the Education Sector has a great post up today explaining how student loan giant Sallie Mae has inserted itself (with help from a corrupt Bush administration official) into virtually every nook and cranny of the federal student loan system. The result is that they can squeeze money from taxpayers regardless of whether the loan is paid or put into default.
Basically, there are three different kinds of private actors involved in the Federal Family Education Loan Program (FFELP – the larger and more expensive of two federal student loan programs):
Lenders: These organizations raise and lend money to students. The government gives them subsidies and promises to pay 97% of the loan if it goes into default.
Guaranty Agencies: These organizations administer the guarantee against default for lenders, and prevent default on federal student loans. They are also paid by the government to do collections or rehabilitations on defaulted loans, which, as many have pointed out, is a conflict of interest. They typically contract this work to a…
Collections Agencies: These firms are contracted by guarunty agencies to track down borrowers in default, and collect as much of the outstanding debt as possible.
Last night, Jon Stewart chatted about student loan reform with Austan Goolsbee, an economist and member of the Council of Economic Advisers. The college affordability action starts at 4:38, check it out:
One of the biggest sticking points against reform has been the fear that the government couldn’t handle the increase in loan volume and that schools would have a hard time switching over to the Direct Loan Program. Duncan sets the record straight:
By working with private sector companies with expertise in the field, we are prepared to initiate all new student loans in the existing federal Direct Loan program. Right now, the Education Department already owns and services 80% of the student loans made last year. It owns such a high volume of loans chiefly because it had to take emergency action in 2008 to ensure students had access to loans when lending in the nation’s credit markets was frozen.
Our experience handling the bulk of student loans makes me confident in our capability. This year alone, an additional 500 colleges and universities joined the Direct Loan program. Just last month, the department’s independent inspector general’s office issued a report documenting that the Education Department had taken the right management steps so that all loans can be serviced by the Direct Loan program.
In a recent survey by the National Association of Student Financial Aid Administrators, schools that have made the switch to direct lending overwhelmingly reported the conversion was easy and quick. That is just one reason why that association of financial aid experts, along with organizations representing the nation’s largest public and private universities, community colleges and college students, support the department’s Direct Loan proposal.
By working with private sector companies with expertise in the field, we are prepared to initiate all new student loans in the existing federal Direct Loan program. Right now, the Education Department already owns and services 80% of the student loans made last year. It owns such a high volume of loans chiefly because it had to take emergency action in 2008 to ensure students had access to loans when lending in the nation’s credit markets was frozen. (more…)
On Wednesday, Dec. 2nd, Campus Progress, the US Students Association, and US PIRG sponsored an event about the college affordability crisis, student organizing for affordable and accessible universities, and the Student Aid and Fiscal Responsibility Act.
Much of the discussion centered around the 32% fee hikes in California, and the student reaction to that decision. Check it out:
The battle to make college more affordable has come down to a critical few weeks in the Senate. The banks and student loan companies already have spent millions of dollars on lobbying, PR firms, and advertisements in their attempt to stop reform and hang on to wasteful government subsidies. This would mean $87 billion less for programs to make college more affordable and accessible.
Now Campus Progress is taking action. We’ve raised money to put this :30 second spot on cable TV and on Hulu in key states across the country:
We don’t have the kind of money student loan companies have, so we’re going to need your help spreading the ad on Facebook, Twitter, and email if we’re going to get the word out. Click here to help us spread the word.
Campus Progress is working with partners like the US Students Association and the PIRGs to mobilize students across the country for the Raising Pell Week of Action, October 6th – 8th.
Students are taking action to ensure that their Senators support President Obama’s plan to stop funding government subsidies to banks, and instead increase the Federal Pell Grant.
In a 30-17 vote, the House Education and Labor Committee passed the Student Aid and Fiscal Responsibility Act (SAFRA, HR 3221) today, making it likely that it will reach the full House within the week.
The bill would represent the largest investment in student aid in US history. By cutting wasteful subsidies to student loan companies, this legislation would save $87 billion over ten years that would be reinvested in increasing student aid, investing in college access and completion programs, supporting community colleges, Historically Black Colleges and Universities (HBCU), and minority serving institutions, and other programs that would increase educational opportunities for low and middle income families. It would also commit $10 billion to reducing the deficit.
There were several important changes to the bill, including: (more…)
According to an article in the New York Times, the House Committee on Education and Labor will be introducing legislation this week along the lines of President Obama’s proposal to cut wasteful subsidies to student loan companies and use the $87 billion in savings to make college more affordable for low and middle income students.
Loan companies circulated at least 13 different plans on Capitol Hill, lobbied furiously against the President’s proposal, and finally (almost) uniting around a single “Frankenstein” counter-proposal. It now looks like these efforts have failed to influence the shape of the legislation that will be considered in the House Education and Labor Committee. (more…)
Funding our Future is a campaign to pass a progressive federal budget for 2010 and ensure that our nation.s key economic choices invest in our education, spark reform of our health care system, and address climate change through cap and trade and clean energy investments. Click here for more info.
In a 30-17 vote, the House Education and Labor Committee passed the 