Goverment to take 100% control of student loans!

[JVParkour]

http://online.wsj.com/article/BT-CO-20090918-707269.html

Holy crap....

WASHINGTON -(Dow Jones)- The U.S. House of Representatives approved legislation Thursday that would effectively end private-lender involvement in the student loan market, establishing the federal government as the sole provider of college loans.

The bill introduces sweeping changes to the U.S. higher education system, and serves as the third central plank of U.S. President Barack Obama's domestic agenda. It aims to make college more accessible and improve graduation rates.

"This bill will end the billions upon billions of dollars in unwarranted subsidies that we hand out to banks and financial institutions, and will use that money to guarantee access to low-cost loans," Obama said in a statement.

Like the continuing efforts at overhauling health care, the changes to the federal government's higher education policies would have a serious impact on the bottom line for private-sector players currently serving the market place.

The House vote was 253-to-171, largely along party lines.

Under the legislation, all lenders would be cut out of the market for originating loans. There would still be a role for private banks and lenders to bid for a limited number of contracts to service the loans after they are made by the government.

The Federal Family Education Loan Program, wherein the government guarantees loans made by private lenders, remains the single largest source of college loans. Lenders made related loans for students at 4,465 schools for the 2008-09 academic years. Loan volume totalled $74 billion, up 13% from $65.3 billion a year earlier.

For companies like SLM Corp. (SLM), better known as Sallie Mae, the proposed changes are already having an impact. This week, Fitch Ratings downgraded Sallie Mae to BBB- status, and called its outlook negative.

Sallie Mae's shares closed down 2.71% at $8.99.

"Today the House made a clear choice to stop funneling vital taxpayer dollars through board rooms and start sending them directly to dorm rooms," said Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee.

The Obama administration would use anticipated savings from the measure to increase grants for low-income students, boost funding for minority student groups, provide money for school construction, with a small portion left over to pay down the deficit.

The non-partisan Congressional Budget Office said that ending fees paid to private lenders would save the taxpayer $87 billion over the next decade.

An alternative proposal floated by a group of lenders including Sallie Mae would realize the same level of savings, the CBO said.

In the Senate, staff on the Health Education Labor and Pensions Committee are drafting legislation similar to the House version, according to a Senate Democratic aide.

The Senate bill also would end private-lender origination of loans, the aide said, leaving the federal government as the sole provider of college loans.

Martha Holler, a spokeswoman for Sallie Mae, said the Senate has the opportunity to pass legislation that realizes significant savings "without sacrificing choice and competition for students."

The House vote comes after more than two years of turmoil for the student loan industry.

In 2007, Congress reduced government payments to lenders making federally guaranteed student loans by more than $20 billion.

The resulting cut in profits came just as credit markets were beginning to seize up, eventually making it nearly impossible for lenders to package student loans into securities and sell them to investors, a key source of liquidity in the student loan market.

Complaining that the business is no longer profitable, more than 180 lenders have exited all or part of the federal student loan program since the fall of 2007.

Still, remaining lenders have fought against the changes, arguing that providing loans to students is among the best ways to establish a relationship with new clients that could lead to more lucrative business in the future.

Passage of the legislation would require the Department of Education to accommodate around 4,000 schools by next July 1. And those schools would have to have their processing systems prepared well before that since most financial aid packages are typically distributed in the spring.

Lending experts at some of the largest schools in the country, such as the University of Notre Dame, have said that they won't have sufficient time to make the transition to a government-run lending program.

Having lined up additional contractors to handle the anticipated increase in direct-loan volume, federal officials say they are prepared. Absent an unanticipated breakdown in the system, industry observers say borrowers are unlikely to notice the shift.

House lawmakers attached a measure to the student loan bill ending all federal government funding of the community organizing group Acorn - the Association of Community Organizations for Reform Now. The group has long been in the cross hairs of Republicans, but more recently has been accused of widespread fraud and other illegal activities.

[tremendoustie]

http://online.wsj.com/article/BT-CO-20090918-707269.html (http://online.wsj.com/article/BT-CO-20090918-707269.html)

Holy crap....

Government subsidized loans ... because $40,000 a year is just too cheap.

[Dionysus]

This has already happened in CA. Plus, CSU campuses aren't accepting any graduate school apps for Spring 2010, cause they're broke. I guess they figure the best way to get out of this disaster of incompetence is to destroy higher education.

http://www.thebusinessjournal.com/index.php?option=com_content&view=article&id=1033:csu-campuses-not-enrolling-for-spring-2010&catid=72:education&Itemid=767

[Bruno]

And as a result, tuition will soar since all loans will be government backed.

And students will be compelled to take part in Obama Youth programs to get a portion of their student loans forgiven.

[Matt Collins]

Where in the Constitution is this authorized? Can anyone cite this?!?!

[BenIsForRon]

Guys, this actually is an improvement. The federal loans of the past were actually loans from banks like citi and BoA. Interest was payed by tax payers, so the banks basically had a zero risk loan. Now the government is dealing with all the money, taking banks out of the picture (well, almost).

Of course, this doesn't mean you can't get private loans, it's just that the government backed loans are done completely (almost) in house now. I just see it as citibank having one less way to drain money out of tax payer pockets.

[tangent4ronpaul]

As a result, tuition will soar since all loans will be government backed.

And students will be compelled to take part in Obama Youth programs to get a portion of their student loans forgiven.

You got it - this is a step toward the Obama youth Corp.

Also note the bit about minorities - like in the health care bill - if you're a minority, medical school here you go! and on the gvmts dime, but if your a WASP, well, sorry - your out of luck.

And you're right - tuition rates are going to skyrocket! Perhaps private schools will benefit from this.

supposedly, this is going to save the gvmt 80 Billion a year... Education rationing here we come!

YeeHaw!!!!!!!!!

-t

[Bruno]

Guys, this actually is a deterioration. The federal loans of the past were actually loans from banks like citi and BoA. Interest was payed by tax payers, so the banks basically had a zero risk loan. Now the government is dealing with all the money, taking banks out of the picture (well, almost).

Of course, this doesn't mean you can't get private loans, it's just that the government backed loans are done completely (almost) in house now. I just see it as Government having one MORE way to drain money out of tax payer pockets.

fixed that for ya

[DapperDan]

I feel bad for new students to universities that need loans.

Get grants and scholarships to pay all you can.

My loan was transfered to the Dept of Education and they are relentless with telling me that my payments are due at the end of the year. They even sent me separate letters saying what my interest is on certain payment styles. I plan on paying it off in 3 months or less :|

I'd rather be paying Wachovia back instead of these goons even if it is fiat money.

[Jordan]

Actually, this is an improvement over the previous system.


Before this legislation banks would borrow from other banks at the LIBOR rate or from the Fed at rates as low as 1% then lend to students at 6.2% (set by Congress). The government also backed the debt in case the student defaulted. So the government was the only one who could lose, and the banks could make 5.2% with OPM.

[angelatc]

You guys probably aren't old enough to remember, but they certainly didn't plan to to take over student loans. They were only going to provide a public, affordable option.

[Jordan]

Guys, this actually is an improvement. The federal loans of the past were actually loans from banks like citi and BoA. Interest was payed by tax payers, so the banks basically had a zero risk loan. Now the government is dealing with all the money, taking banks out of the picture (well, almost).

Of course, this doesn't mean you can't get private loans, it's just that the government backed loans are done completely (almost) in house now. I just see it as citibank having one less way to drain money out of tax payer pockets.

Agreed. IMO, its an improvement. Obviously not what I wanted, but an improvement still.

[Bruno]

Actually, this is an improvement over the previous system.


Before this legislation banks would borrow from other banks at the LIBOR rate or from the Fed at rates as low as 1% then lend to students at 6.2% (set by Congress). The government also backed the debt in case the student defaulted. So the government was the only one who could lose, and the banks could make 5.2% with OPM.

You just made the case for ending the Fed and getting government involvement completely out of the business of financing higher education, not getting more involved in it.

[jmdrake]

Where in the Constitution is this authorized? Can anyone cite this?!?!

Technically speaking the current system (government subsidizing private bank loans) isn't in the constitution either. I'm not really sure about this one. Nobody has debated that the change won't save money. Some in the GOP are complaining about the potential loss of 34,000 jobs in the finance industry. But I didn't think the student loan program was supposed to be a jobs program.

What we need to look at is are there free market approaches that can reduce the cost of a college and/or university education? Take law school for instance. I could save a ton of money if I went to Nashville School of Law or to an online law school. But the ABA has a lock on state bar panels and the deck is stacked against non ABA approved schools. I read a case of a lawyer who graduated from NSL, was able to practice in Tennessee, but wasn't allowed to stand for the bar across the border in Kentucky. The KY bar did "evaluate" NSL to see if it met their standards. The evaluator they sent was a dean from a KY ABA approved law school. Talk about your conflict of interest! :eek:

[angelatc]

Of course, this doesn't mean you can't get private loans, it's just that the government backed loans are done completely (almost) in house now. I just see it as citibank having one less way to drain money out of tax payer pockets.

So the only instrument in the banking industry the government won't insure are the instruments are in the markets that the government competes in?

Citibank can't drain your wallet unless you choose to allow them to drain your wallet. The government feeds at will.

Analysts have said this will be the end of the private student loan market, by the way. And the article above says, "The Senate bill also would end private-lender origination of loans, the aide said, leaving the federal government as the sole provider of college loans."

[sevin]

So what does this mean? Interest rates will go up? Tuition will get more expensive? Education will be rationed? fuck

[Jordan]

You just made the case for ending the Fed and getting government involvement completely out of the business of financing higher education, not getting more involved in it.

Yeah I did, and that is the position I hold.

Within the confines of the system, this is an improvement. Would I like to see educational loans go entirely free market? Of course.

[BenIsForRon]

So the only instrument in the banking industry the government won't insure are the instruments are in the markets that the government competes in?

Citibank can't drain your wallet unless you choose to allow them to drain your wallet. The government feeds at will.

Analysts have said this will be the end of the private student loan market, by the way.

Students choose whether to enter the federal loan program or not. Before this bill, banks made all the profits from the program. At least with this bill, some of the money will go back into the tax-payers hands, (though probably less than what went in).

Here's my main point: I think we all agree here that giant banks like Citi and BoA are just as much a part of the government as anything else. So I actually see this as government reducing waste in a way by taking some of the profiteers out of the picture. Of course I would like to see government staying out of loans all together, but that doesn't mean that this bill won't save tax payer money.

[Matt Collins]

What we need to look at is are there free market approaches that can reduce the cost of a college and/or university education? Take law school for instance. I could save a ton of money if I went to Nashville School of Law or to an online law school. But the ABA has a lock on state bar panels and the deck is stacked against non ABA approved schools. I read a case of a lawyer who graduated from NSL, was able to practice in Tennessee, but wasn't allowed to stand for the bar across the border in Kentucky. The KY bar did "evaluate" NSL to see if it met their standards. The evaluator they sent was a dean from a KY ABA approved law school. Talk about your conflict of interest! :eek:
Yeah that's the prime reason that if I ever go to law school it won't be NSL. ALthough you and I both know someone who makes a TON of money as an atty who graduated from NSL and is now in an influential position politically speaking. ;) However my guess is that this person is the exception rather than the rule.

[angelatc]

Yeah I did, and that is the position I hold.

Within the confines of the system, this is an improvement. Would I like to see educational loans go entirely free market? Of course.

No, this isn't an improvement. Wait until you see the collection procedures Uncle Sam uses.

Half your salary snagged on payday, and - even better, straight our of Obama's playbook - work for the government for a year and get the debt wiped clean.

[BenIsForRon]

At least with this bill, some of the money will go back into the tax-payers hands, (though probably less than what went in).


I should elaborate on this statement. I know we never get anything back from the government, but at least in theory its coming back into our hands.

[angelatc]

Students choose whether to enter the federal loan program or not.

You didn't read the article. The Senate bill wipes out the private market. That's not a choice.

[angelatc]

I should elaborate on this statement. I know we never get anything back from the government, but at least in theory its coming back into our hands.

You don't remember Obama saying that he would erase debt for people who worked in the public sector for a little while? This is step one in that plan.

So not only do you get to finance a world class Harvard education, you'll get to pay a graduates salary and benefits for a year while he works defending pimps and hos from an ACORN legal aid office on the South side.

Wake up already. They have no interest in collecting the money. They want to provide free college to everybody. A beautiful, but Utopian and economically unsustainable plan.

[BenIsForRon]

You didn't read the article. The Senate bill wipes out the private market. That's not a choice.

No, I think you misread the article. This article is talking about federal loans, which up until now, have just been private loans backed by tax payer money. In other words, they were zero risk loans for the bank. Really, there is no reason to have them involved in a government loan program. This shouldn't effect loans done completely outside of government, like between a bank and a student directly.

This statement from the banking industry sums up my point pretty well:



Still, remaining lenders have fought against the changes, arguing that providing loans to students is among the best ways to establish a relationship with new clients that could lead to more lucrative business in the future.

[Bruno]

No, I think you misread the article. This article is talking about federal loans, which up until now, have just been private loans backed by tax payer money. In other words, they were zero risk loans for the bank. Really, there is no reason to have them involved in a government loan program. This shouldn't effect loans done completely outside of government, like between a bank and a student directly.

This statement from the banking industry sums up my point pretty well:

Still, remaining lenders have fought against the changes, arguing that providing loans to students is among the best ways to establish a relationship with new clients that could lead to more lucrative business in the future.



So instead, Obama gets their business and loyalty. ;) They will be endentured servants to Big Government until the loan is paid in full.

[BenIsForRon]

You don't remember Obama saying that he would erase debt for people who worked in the public sector for a little while? This is step one in that plan.

So not only do you get to finance a world class Harvard education, you'll get to pay a graduates salary and benefits for a year while he works defending pimps and hos from an ACORN legal aid office on the South side.

Wake up already.

Chill out, I agree with you, I'm just saying you don't understand what this bill is about. I agree that Obama is trying to increase the size of government by tricking people into becoming slaves for it. But this bill doesn't do anything that makes that reality any closer, it just keeps banks from getting their hands on federal loans, which is good IMO.

[angelatc]

No, I think you misread the article.

I think you skimmed the article.


The Senate bill also would end private-lender origination of loans, the aide said, leaving the federal government as the sole provider of college loans.

[angelatc]

Chill out, I agree with you, I'm just saying you don't understand what this bill is about. I agree that Obama is trying to increase the size of government by tricking people into becoming slaves for it. But this bill doesn't do anything that makes that reality any closer, it just keeps banks from getting their hands on federal loans, which is good IMO.

I worked in the financial services industry for 12 years. I understand exactly what this is about.

[BenIsForRon]

So instead, Obama gets their business and loyalty. ;)

Federal student loans have been around for much longer than Obama has been president. Stop pretending like I'm a big government socialist just because I'm not part of your little echo chamber.

[tmosley]

fixed that for ya

You miss the point. The government was just as involved before, it's just that there was another middleman with assured profits and no reason to negotiate on anything ever with people who had loans.

It IS an improvement, in the same way that ending the Fed will be an improvement, even if it means that the government takes direct control of the printing presses again. We're cutting off some leeches is all that is happening.

Now admittedly, the new agency which controls who gets loans and for how much may go crazy with the money, but that's no worse than what the banks were doing.

[BenIsForRon]

I think you skimmed the article.

"The Senate bill also would end private-lender origination of loans, the aide said, leaving the federal government as the sole provider of college loans."

My understanding is that this about federal loans, which were technically private loans that government guaranteed. Now, government provides the actual loan.

Anybody have another article about this? I'm pretty sure I'm reading this right, but I could use some more proof.

[tmosley]

You didn't read the article. The Senate bill wipes out the private market. That's not a choice.

The "private market" was 100% government controlled, just with a set of middlemen making profits rather than bureaucrats. Private student loans can still be had, these are only the government subsidized loans. Of course, if I am wrong, please let me know.

[tangent4ronpaul]

You guys probably aren't old enough to remember, but they certainly didn't plan to to take over student loans. They were only going to provide a public, affordable option.

Considering the current Health Care debate...

ROTGLMAO!

And tuition started to to skyrocket, didn't it?

-t

[Cowlesy]

If I'm CFO of a College, I can now happily report to my Board of Trustees that we can continue our 9.5% tuition hikes Year-over-Year, because even though we didn't get as many kids last year due to the recession and tightening lending standards meaning we should probably make our program more affordable, the government will give anyone a loan, and so more kids will be able to borrow $50k/year to get an education.

Also don't forget, the only way you can discharge a student loan in your name, is death.

[BenIsForRon]

The "private market" was 100% government controlled, just with a set of middlemen making profits rather than bureaucrats. Private student loans can still be had, these are only the government subsidized loans. Of course, if I am wrong, please let me know.

Thanks Tmosely and Jordan, I know I'm not crazy. People really need to read these things more closely, otherwise they'll be talking to someone on the street, saying "Government is ending all private loans!" and end up looking like a dumbass.

[Bruno]

Federal student loans have been around for much longer than Obama has been president. Stop pretending like I'm a big government socialist just because I'm not part of your little echo chamber.

:confused: I was never intending to call YOU a big government socialist.

[tmosley]

If I'm CFO of a College, I can now happily report to my Board of Trustees that we can continue our 9.5% tuition hikes Year-over-Year, because even though we didn't get as many kids last year due to the recession and tightening lending standards meaning we should probably make our program more affordable, the government will give anyone a loan, and so more kids will be able to borrow $50k/year to get an education.

Also don't forget, the only way you can discharge a student loan in your name, is death.

You can also dissolve the government that issued it :D

[BenIsForRon]

:confused: I was never intending to call YOU a big government socialist.

My bad, that was the impression I got. It's happened to me quite a few times on this forum though.

[BenIsForRon]

You can also dissolve the government that issued it :D

Hear hear!

[BlackTerrel]

And as a result, tuition will soar since all loans will be government backed.

This is one of the biggest issues with student loans. Colleges charge exhorbitant tuition because students have access to cash. If there were no loans available, tuition would simply be cheaper and professors wouldn't make such enormous salaries, and perhaps would have to teach more rather than devoting all their time and resources towards "research".

[Scofield]

This also forces anyone who needs loans for college to get a Social Security Number, as if you are not eligible for Federal Student Loans unless you have one.

[Warrior_of_Freedom]

*shrug* I have a college education and I never took out a loan or went 1 cent into debt.

[BenIsForRon]

This is one of the biggest issues with student loans. Colleges charge exhorbitant tuition because students have access to cash. If there were no loans available, tuition would simply be cheaper and professors wouldn't make such enormous salaries, and perhaps would have to teach more rather than devoting all their time and resources towards "research".

Yes but this bill doesn't change anything. Government loans were already government backed, just the actual loan came from big banks. Now the loan comes directly from the government.


This also forces anyone who needs loans for college to get a Social Security Number, as if you are not eligible for Federal Student Loans unless you have one.

O...k. Don't you need a SS number to get private loans too? I think all colleges require you have SS number anyway.

[BlackTerrel]

Yes but this bill doesn't change anything. Government loans were already government backed, just the actual loan came from big banks. Now the loan comes directly from the government.

I know. Just saying I've always hated the idea of government backed student loans. People think they make college affordable, but it is exactly that access to capital which makes tuition so expensive in the first place.

[Jordan]

You miss the point. The government was just as involved before, it's just that there was another middleman with assured profits and no reason to negotiate on anything ever with people who had loans.

It IS an improvement, in the same way that ending the Fed will be an improvement, even if it means that the government takes direct control of the printing presses again. We're cutting off some leeches is all that is happening.

Now admittedly, the new agency which controls who gets loans and for how much may go crazy with the money, but that's no worse than what the banks were doing.


Woohoo, someone gets it!

[Bruno]

Did/how did Ron vote?

[angelatc]

*shrug* I have a college education and I never took out a loan or went 1 cent into debt.

How old are you? Just wondering if that's still possible, or if we're showing our age.

[BenIsForRon]

Did/how did Ron vote?

Ron did not vote. It took me forever to find the name and number of the bill, though. I hate how newspapers never post that information, it's like they don't want us to know more about the bill than what they tell us.

[BenIsForRon]

How old are you? Just wondering if that's still possible, or if we're showing our age.

I'm in college, and I have quite a few friends who are paying for their own tuition as they go. A lot of them work their ass off in the summer, and then work part time as well in the fall/spring.

[TastyWheat]

If that was the only change I might support it, but the bill asks for additional funding and that's completely uncalled for.

[silverhandorder]

This changes nothing in the grand scheme of things. Simply put they threw the middle man out.

[Bruno]

Ron was a no-vote. It took me forever to find the name and number of the bill, though. I hate how newspapers never post that information, it's like they don't want us to know more about the bill than what they tell us.

Thanks! It feels like they don't post the names on purpose. How hard would it be for them link to it?

[Lois]

No matter how you interpret it, it's an Unconstitutional Power Grab by Obama, like usual -- here's my post from the other thread about the Defunding Acorn Bill, which they inserted in the Government Takeover of Student Loan Bill --

* * * * * *
The Bill (with the ACORN Defunding in it) was the "Student Loan Bill".

In other words, yesterday - Constitution Day -

THE GOVERNMENT TOOK OVER THE STUDENT LOAN INDUSTRY

* * * * * * * *

House of Representatives Votes to Take Over All Student Loans

http://www.redstate.com/erick/2009/0...student-loans/


Dems Killing Access to Higher Education and Adding Secret Czar, too

http://www.redstate.com/erick/2009/0...-new-czar-too/

* * * * * * * **

House Expected to Pass Government Takeover of Student Loans

http://www.gopusa.com/news/2009/sept...nt_loans.shtml


* * * * * * *

The Quietest Trillion
Congratulations. You're about to own $100 billion a year in student loans.

http://online.wsj.com/article/SB1000...157021052.html



* * * * * * *

Government to take over all student loans (Rep. Michele Bachmann)

http://thehill.com/blogs/congress-bl...chele-bachmann



* * * * * * *

Student loan market overhaul approved by U.S. House

http://www.reuters.com/article/polit...58G5KF20090917

* * * * * *



http://hotair.com/archives/2009/09/1...ents-to-acorn/
Reply With Quote

[BenIsForRon]

WHOOPS!!!! I meant to say that Ron DID NOT VOTE. In my post it looked like I said he was a nay. I just went back and changed my post. Sorry guys.

So I would like to know why he abstained from this one.

[BenIsForRon]

Lois, you posted a bunch of articles from Red State with misleading titles. I think we should stay away from that and keep to the facts. Gov is NOT taking over all private loans. Read Tmosley, Jordan, and my posts to get a better idea.

[paulitics]

Has this gone to the Senate?