Reuters: Obama to sign new student aid initiative

[#98QBKiller]

http://www.reuters.com/article/idUSTRE62T1FX20100330

(Reuters) - President Barack Obama on Tuesday will sign into law an overhaul of the college student loan program which cuts commercial banks out of the student loan business, drying up a multibillion dollar profit stream.

U.S.

The student loan overhaul fulfills a long-time goal of Democratic lawmakers to end the bankers' role as middlemen and replace them with direct federal loans and aid to students.

The White House said the change would save taxpayers $68 billion over the next decade. The money saved will help expand and strengthen the federal Pell Grant program for students.

The change will cap college graduates' annual student loan repayments at 10 percent of their income, spends more at community colleges and awards $2.55 billion to historically black colleges and universities.

Obama's fellow Democrats in the Senate and House of Representatives got the measure through Congress by tucking it into a package of changes approved last Thursday to the sweeping U.S. healthcare overhaul.

While the healthcare overhaul itself has generated skepticism among many Americans worried about its cost and associated debt, the student loan changes have been popular.

The CNN/Opinion Research Corporation said last week a telephone survey of 1,030 adult Americans found 64 percent of respondents approved it, while 34 percent opposed it.

Obama is to sign the measure at an event at Northern Virginia Community College in nearby Alexandria.

"Year after year, we've seen billions of taxpayer dollars handed out as subsidies to the bankers and middlemen who handle federal student loans, when that money should have gone to advancing the dreams of our students and working families," Obama said in his weekly radio and Web address on Saturday.

He said previous efforts to change the program had been thwarted by "special interests that fought tooth and nail to preserve their exclusive giveaway."

While student groups and Democratic lawmakers have backed the overhaul, student loan giant Sallie Mae and other private lenders have staunchly opposed it.

Opponents say the action will reduce students' lending options and eliminate the jobs of thousands of private lenders, hurting efforts to remedy an ailing U.S. economy that has a 9.7 unemployment rate.

A number of lawmakers, most Republicans, opposed the measure, saying it would end a successful program and amount to an unwarranted federal takeover of the student loan industry.

Private lenders would still have a role, albeit a greatly diminished one, in servicing loans, such as helping collect payments.

(Reporting by Steve Holland; editing by Todd Eastham)

[@DCGoldPants]

I'd also like to see a G.I. Bill on roids. I want all the fine folks who are serving to get a full ride for college if they choose.

[TimmySmith]

Last week it was tax money to insurance companies.

Now it is tax money to colleges. Is the government planning on fining people who refuse to attend college?

Where is all this tax money going to come from? Actually, I don't want to know.

[twa]

I'd also like to see a G.I. Bill on roids. I want all the fine folks who are serving to get a full ride for college if they choose.

Hopefully it is better managed than this program:silly:

Promises are easy,fulfilling them is another matter

http://news.yahoo.com/s/mcclatchy/20100328/pl_mcclatchy/3462186

Abrupt end of college tuition help angers military spouses

[@DCGoldPants]

Last week it was tax money to insurance companies.

Now it is tax money to colleges. Is the government planning on fining people who refuse to attend college?

Where is all this tax money going to come from? Actually, I don't want to know.

Opposed to the money we used to pay for two wars? Oh yeah.....nobody cares bout adding on the debt when payment isn't due today.

How is it they understood the need to raise money for war efforts over 60 years ago, but in the past 10 years the way we were told to support the cause was to keep shopping?

[The Brave Little Toaster Oven]

too bad I wont benefit from this

[sjinhan]

Last week it was tax money to insurance companies.

Now it is tax money to colleges. Is the government planning on fining people who refuse to attend college?

Where is all this tax money going to come from? Actually, I don't want to know.

umm by eliminate the subsidies that they hand out to banks??? You might have just skimmed over it...

seems like a common sense deal.. right now the government is basically giving out the loans to the students and the commerical banks are collecting the interest. So basically government is taking on all the risk while banks are taking all the benefit....

this bill fixes that problem by letting the government recieve the interest instead of just giving it away to the banks...

[PokerPacker]

I was skeptical when reading the title, but reading it I don't think its too bad. However one thing did jump out at me.

The change will cap college graduates' annual student loan repayments at 10 percent of their income, spends more at community colleges and awards $2.55 billion to historically black colleges and universities.

First question, why are we just handing out money to universities? Wouldn't that money be better put to more student grants and loans which would find its way to a university anyways?

Second, is this exclusive to "historically black universities", or are they just specifying them for no reason? I don't like the idea of giving billions of dollars to universities because they're "historically black". Screams of racial preference.

[sjinhan]

I was skeptical when reading the title, but reading it I don't think its too bad. However one thing did jump out at me.

First question, why are we just handing out money to universities? Wouldn't that money be better put to more student grants and loans which would find its way to a university anyways?

Second, is this exclusive to "historically black universities", or are they just specifying them for no reason? I don't like the idea of giving billions of dollars to universities because they're "historically black". Screams of racial preference.

i dont like how they worded it...

However these "historically black universities" do act as a one of the major mechanisms to help the inner city kids escape the destructive cycle that is happening around them... I know I am making a stereotype but I would assume that on average those colleges would have higher percentage of students that have serious need for need-based aid...

I would support in giving money to those universities if it is being used that way... in matter of fact i would also support use of that money to colleges that support a predominately white population as well if the students are predominately poverty/poor backgrounds..

[TheGoodBits]

I was skeptical when reading the title, but reading it I don't think its too bad. However one thing did jump out at me.

First question, why are we just handing out money to universities? Wouldn't that money be better put to more student grants and loans which would find its way to a university anyways?

Second, is this exclusive to "historically black universities", or are they just specifying them for no reason? I don't like the idea of giving billions of dollars to universities because they're "historically black". Screams of racial preference.

I also think it might have just been worded poorly. My first impression was the same as yours, but after rereading it I think they might mean they are making federal student aid more available to these colleges. Could be wrong though.

[Popeman38]

The Fed govt should not be "lending" money to students. That is, by definition, the job of a BANK. Banks do not lend money without returning a profit (would be really dumb to do so). Instead of eliminating the banks (and therefore the profit that in turn makes more money available to be lent, both to students and in overall loan), why doesn't the Fed simply cap required monthly payments at 10% (or less if the bank chooses) and cap the interest rate the banks can charge. You are eliminating a revenue stream while you try to improve the economy. IDIOTIC! This is worse than the bailouts, because there is no long term benefit.

[elkabong82]

the banks were getting very stingy with loans the past few years, and from what I've heard from friends it's been like that for awhile.

all that has happened is the middle man was cut out, so loans are more likely to happen, instead of banks greedily sitting on money that's supposed to go to students.

my loans have a much better guarantee on them now, and I have several friends who couldn't get the full loan amount ($5-8K left) who are already planning on returning to school now because they'll actually get the full loan amount they need.

[SnyderShrugged]

Don't you just love the smell of nationalization in the morning? Wagers on what industry is the next victim?

[TimmySmith]

umm by eliminate the subsidies that they hand out to banks??? You might have just skimmed over it...

So just eliminating the subsidies themselves couldn't fix this? Instead they will subsidize the entire process and Sallie Mae will continue to process the loans, collect the money, and now they incur none of the liability.

[elkabong82]

The Fed govt should not be "lending" money to students. That is, by definition, the job of a BANK. Banks do not lend money without returning a profit (would be really dumb to do so). Instead of eliminating the banks (and therefore the profit that in turn makes more money available to be lent, both to students and in overall loan), why doesn't the Fed simply cap required monthly payments at 10% (or less if the bank chooses) and cap the interest rate the banks can charge. You are eliminating a revenue stream while you try to improve the economy. IDIOTIC! This is worse than the bailouts, because there is no long term benefit.

more students graduate now, so they get better jobs, higher pay, and contribute to the economy and their profession.

the banks have been getting the loan money from the government, but there was no guarantee the banks had to give all the money to students through loans. The banks, of course, did sit on a decent amount of the money, screwing students out of loans which actually covered everything just for their own greed. That's why the banks have been cut out of the process now, it's also why the article referred to the banks as "middle men," they aren't the ones who have been funding it, they've helped a little, but most of the student aid programs were already federally funded.

[PokerPacker]

Don't you just love the smell of nationalization in the morning? Wagers on what industry is the next victim?

The thing about this, though, is that the government was already involved in it. They were in a sense contracting banks to do it. Give money to banks to give loans?

[TheGoodBits]

So just eliminating the subsidies themselves couldn't fix this? Instead they will subsidize the entire process and Sallie Mae will continue to process the loans, collect the money, and now they incur none of the liability.

Eliminating those subsidies would increase the cost of a college education by thousands of dollars. You're talking about making the cost of attendance prohibitive for students from low income families.

[Popeman38]

more students graduate now, so they get better jobs, higher pay, and contribute to the economy and their profession.

the banks have been getting the loan money from the government, but there was no guarantee the banks had to give all the money to students through loans. The banks, of course, did sit on a decent amount of the money, screwing students out of loans which actually covered everything just for their own greed. That's why the banks have been cut out of the process now, it's also why the article referred to the banks as "middle men," they aren't the ones who have been funding it, they've helped a little, but most of the student aid programs were already federally funded.

Did the banks make money off the program? Yes. Positive revenue stream. Will the govt make money off the program? No, because if you know govt accounting you know it is a zero sum process. You end up with a surplus, your budget gets cut. The exact opposite of the way it should work.

[Popeman38]

The thing about this, though, is that the government was already involved in it. They were in a sense contracting banks to do it. Give money to banks to give loans?

So, do you support the govt ending def contracts and simply hiring the workers themselves? The govt is supposed to contract out, otherwise you end up with a massive, MASSIVE govt employee base. What group of employees are the most inefficient group in the history of employment? The govt sector.

Also, each "contracting" job (meaning middle man, as described) results in large volumes of money being pumped into that sector. Usually, each dollar the govt hand out turns into $2 dollars as the work gets farmed out/sub-contracted (spending multiplier). Take away the middle man, there is no multiplier effect. The govt simply hands out a dollar today to get a fraction of a dollar tomorrow (inflation). It is the opposite of a business plan.

[wantarace17]

Actually i believe i heard sallie mae will be completely cut out of it. Unless i am wrong

[PokerPacker]

So, do you support the govt ending def contracts and simply hiring the workers themselves? The govt is supposed to contract out, otherwise you end up with a massive, MASSIVE govt employee base. What group of employees are the most inefficient group in the history of employment? The govt sector.

Also, each "contracting" job (meaning middle man, as described) results in large volumes of money being pumped into that sector. Usually, each dollar the govt hand out turns into $2 dollars as the work gets farmed out/sub-contracted (spending multiplier). Take away the middle man, there is no multiplier effect. The govt simply hands out a dollar today to get a fraction of a dollar tomorrow (inflation). It is the opposite of a business plan.

Don't get me wrong, I don't support big government. I was trying to inflict a sense of doubt in my post as well, but I couldn't come up with the words to adequately express it, so I gave up. I probably should've just deleted the post entirely since I couldn't finish the entire thought.

[Tulane Skins Fan]

So, it seems none of you have ever taken student loans before? If you did, you'd know that the federal government already provides up to 18K a year to a student in loans.

This isn't groundbreaking.

[TimmySmith]

Eliminating those subsidies would increase the cost of a college education by thousands of dollars. You're talking about making the cost of attendance prohibitive for students from low income families.

The "cost" of anything is dictated by the marketplace. Eliminate subsidies and see how fast colleges adjust their tuition rates to remain in business.

[TheGoodBits]

The "cost" of anything is dictated by the marketplace. Eliminate subsidies and see how fast colleges adjust their tuition rates to remain in business.

Plenty of lesser qualified kids with more money are turned down every year. Tuition wouldn't drop a dime. If anything, maybe a decrease in the quality of attendees.

[Teller]

If Obama hadn't lost me before, he certainly has now.