NYT: "Obama's Student Loan Overhaul Endangered" Forum

[Anonymous Loser]

First, apologies if this has already been posted. A quick search of TLS didn't turn up anything on this article in today's New York Times. Past threads on TLS have suggested that many posters are somewhat confused about the difference between the FFLEP lending program (where private lenders originate Stafford loans and the like) and the Direct lending program (where the federal gov't originates the loan). The article linked above provides a good overview of how the federal educational lending system currently works, and is worth a quick read.

Mr. Obama’s plan would end a program in which the government pays private, for-profit student lending companies to make risk-free loans using taxpayer money. Instead, the proposed overhaul would broaden the government’s existing direct-lending program, saving billions of dollars that the president had proposed using to expand Pell grant scholarships for low-income students.

Sounds like a good deal. Unfortunately, not everyone agrees:

But the education bill is strongly opposed by some Senate Democrats, particularly those in states where for-profit student lenders are major employers.

[AngryAvocado]

But the education bill is strongly opposed by some Senate Democrats, particularly those in states where for-profit student lenders are major [strike]employers[/strike] donors.

ftfthem

[existenz]

The NY Times is now reporting that a deal has been reached, and the student loan reforms should be included in the health care reconciliation bill (which only requires 50 votes).

Democratic Congressional leaders struck a tentative agreement on Thursday that breathes new life into President Obama’s proposed overhaul of federal student loan programs.

The deal would bundle the bill into an expedited budget package along with the Democratic health care legislation, which would allow for both measures to be passed by the Senate on a simple majority vote. Without the deal, the student loan bill would have been unlikely to pass because it lacked the 60 votes needed to overcome a filibuster.

The bill would end government payments to private, commercial student lenders, leaving the government to lend directly to students. It would also redirect billions of dollars to expand the Pell grant program for low-income students, and to pay for other education initiatives.

Good news for us.

[AngelAuthor]

Bad news for the economy.

[Torvon]

Does anyone have any more concrete information on what exactly the student aid reform will do? I know it is cutting out the banks and saving billions but have they given any kind of numbers for what kind of effect this will have on the Pell Grant amount and such? Also, didn't Obama say something about forgiving loans for all students after ten years in the SOTU address? Is that included here?

[Kobe_Teeth]

Does anyone have any more concrete information on what exactly the student aid reform will do? I know it is cutting out the banks and saving billions but have they given any kind of numbers for what kind of effect this will have on the Pell Grant amount and such? Also, didn't Obama say something about forgiving loans for all students after ten years in the SOTU address? Is that included here?

20 not 10.
Also, I believe he wants to expand Pell.

[ozarkhack]

For one: It'll cut out origination fees.

Maybe small potatoes in scheme of, say, $150K+ in debt. But sounds good to me.

Also: Likely higher Pell grants. Index to inflation, as opposed to increase by congressional action.

At the same time, questionable whether the program will get expected savings, b/c many schools moving to govt as direct lender anyway (I think Colorado, for one, does). From that story: "Instead of rising from the current $5,550 to $6,900 over the next decade -- as the House bill projects -- Harkin said the maximum annual award would rise to between $6,300 and $6,500."

And ... Here's what Obama said in SOTU:

"And let's tell another one million students that when they graduate, they will be required to pay only 10 percent of their income on student loans, and all of their debt will be forgiven after 20 years –- and forgiven after 10 years if they choose a career in public service, because in the United States of America, no one should go broke because they chose to go to college."

The 10-year forgiveness is already in place (see: IBR — public interest/government). The 20 years is a deviation from the current 25 years, I believe. Either way, I'm not sure whether this is in the healthcare compromise that student-loan reform will accompany.

[chango]

bump now that it's as good as a done deal....


Can anyone dumb this down for me? How does the bill affect current law school applicants?

[westbayguy]

Beweare- many provate loand DO NOT charge an up front origination fee-and will pay the government fees for you. The direct loan government program DOES charge fees- up to 4% of the loan amount and DOES NOT WAIVE THEM. This is NOT a great deal for most grad students.

You will end up paying high rates and high fees that will cost you thousands more than today through a private lender- all so you can have the "comfort" of an outlandish 8%+ fixed rate for the next 20 years and not take the risk of a floating rate loan at (currrently 3.25-5.00%)?

think about it

[isaiah6v8]

Hard to say how helpful this will be to the average borrower, the article I am posting applauds it, but I think it really only gets part of the work done.

http://www.insidehighered.com/news/2010 ... a#Comments