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Saturday, July 11th, 2009   12:33 pm | Author: Jerry | Education, Politics/Government |
Tags: government, private lenders, student loans, Treasury
President Obama is moving towards bringing all student loans in-house and it is about time.
The private banking involvement in federal student loans will be eliminated under this plan. I am sure that the lending industries lobbyists are working overtime to derail this plan.
Currently the Federal government subsidizes the loans made by the private banking sector. The banks in turn charge fees for the loans. The elimination of these subsidies will save the government about $87 billion dollars over 10 years which can be used to provide additional loans to underprivileged students.
The private banking industry argues that this will eliminate competition among lenders and that they provide better servicing of the loans.
I think the argument of competition is hogwash and it would not surprise me if these lenders are collaborating to fix the cost of the loans. The argument that they are better equipped to service the loans may be valid but there is no reason that the government can not do as good a job. It all comes back to management and accountability.
This is long overdue. Obama and many Democrats view is that there is no reason that the government should pay these lenders taxpayer money to run a risk free business. The private lenders originate the loans with taxpayer money, the repayments are guaranteed and then they sell the loans back to the Treasury. What a racket at our expense.