I don't think this is a bad thing but the govt is portraying it as something that is saving money but in reality it isn't. I couldn't find the story that had the numbers but the analysis on briefing.com said the govt stated it would save the taxpayers 47.5 billion over 10 years since the subsidies would no longer be paid out. It's not saving any money because it just transfers the high default/low interest student loans over to the govt. Again, I don't think this is a bad idea but I don't like seeing the govt bs themselves into believing this is a cost cutting move. Direct-Lending Program for Student Loans Proposed http://online.wsj.com/article/SB123566428388983701.html?mod=yahoo_hs&ru=yahoo By ROBERT TOMSHO and COREY BOLES Renewing a battle waged during the Clinton administration, President Barack Obama proposed to eliminate private lenders from the student-loan market and have the federal government make all such loans directly. In his spending blueprint for fiscal 2010, Mr. Obama said the shift to the Department of Education's so-called direct-lending program would save more than $4 billion a year in subsidies paid to private lenders and eliminate uncertainty for students "because of turmoil in the financial markets." Direct loans only accounted for about 20% of the $68.2 billion in new federal loans during for the 2007-2008 school year, but interest in them has surged recently as many private lenders have stopped making federally guaranteed loans amid the credit crunch. Student loans themselves don't generate significant earnings for banks because of the high level of defaults, so the fees paid by the government are the main incentive for lenders to take part in the program. One of the largest players in the student-loan market, SLM Corp., saw its shares fall 26% as word of the proposed change filtered out Thursday morning. SLM was down $2.17 to $6.22 a share in early trading on the New York Stock Exchange. The proposal is likely to be greeted favorably by congressional Democrats who have sought to limit private sector involvement in student lending in recent years. The move to scrap the subsidies would be the largest single source of savings from a reduction or elimination of a nondefense government program identified in the budget plan. Write to Robert Tomsho at rob.tomsho@wsj.com and Corey Boles at corey.boles@dowjones.com
My understanding is that (simplified) the loans are generally break even for the lenders, so the gov't pays them to take on those loans, and that's the profit for the bank. By doing it directly, the government would be breaking even on those same loans, but wouldn't have to pay the banks, and that's the $47.5 billion that would be saved. Not sure if I understand it right, but I think that's how it works.
Banks should offer student loans, and there is nothing wrong with that. The government is also welcome to start direct lending and no longer guarantee or subsidize the loans from private companies.
The whole student loan scam is crashing down hard, so will the sky rocketing tuitions. The days of paying 40g a year for a under grad liberal arts degree is probably coming to an end.
Not sure about that, even with skyrocketing costs, College admissions are higher and higher every year. The good schools are as hard or harder to get into as every before. If the schools don't have to lower tuitions, they won't. As long as they have more people applying for positions than what the college has, they will continue to raise rates. If college admissions started dropping for whatever reason, you could see a reduction in costs, but only in schools that aren't sought after.
two major differences. the problem with fannie and freddie they were not regulated enough but still implicitly backed. here this will be hopefully fully regulated so it wont take fannie freddie risks. secondly while owning a home became a cultural goal our nation wanted to accomplish, and while it provided some benefit (pre-2007), getting an education is a huge economic benefit for the country. so even if we lose some money in this, which we will do a lot less of than we were in the past, we more than gain it back in taxes those students will pay in the future.
I am talking about the 100s of liberal arts colleges here in northeast alone, not the Harvard and MITs. When tuition outpaces income growth year after year, and its supported in large by the student loan scam, that's just not sustainable. Unless your degree can get you a good paying job after school, people are going have to make some tough choices.
Are you sure about that? http://www.monstersandcritics.com/n...mas_present_to_the_middle_class_lower_tuition [rquoter]Harvard's Christmas present to the middle class: lower tuition Education News Dec 11, 2007, 10:31 GMT Washington - The elite Harvard University Monday reduced its costs for middle class families in a well-timed Christmas present for high school seniors hustling to prepare university applications by the January 1 deadline. The Boston-based Ivy League School, one of the country's oldest and most prestigious, said it would reduce the annual 45,456-dollar cost by up to two-thirds for families earning less than 180,000 dollars a year. The wealthy school already offers extensive financial aid. The new system would mean families with 180,000 dollars income would pay 18,000 dollars instead of the 30,000 dollars they now pay, the college said in a statement on its website. A 10-per-cent-of-income charge would apply for incomes between 120,000 and 180,000 dollars. Below 120,000 dollars, the percentage steadily drops to zero for families earning 60,000 dollars. Harvard would also remove home equity from financial aid calculations, said Harvard President Drew Faust. 'We want all students who might dream of a Harvard education to know that it is a realistic and affordable option,' said Faust. 'Education is fundamental to the future of individuals and the nation, and we are determined to do our part to restore its place as an engine of opportunity, rather than a source of financial stress.' He said the new plan meant Harvard was no longer 'tinkering at the margins, we are rebuilding the engine.' [/rquoter]
I'm against this in principle, but if the central planners are smart, we could use this to cut back on the number of hipsters with useless degrees. Basically limit the amount of student loan money that go to students pursuing liberal arts and social work degrees. If the government would loan $20,000 per year for an engineering degree, math education degree, or a welding certification, but only $5000 per year for a degree in Finance or Government, it might drive up the cost of useful degrees, but we'd get more graduates interested in creating wealth than pushing it around or destroying it.
Agreed. In addition, my man weslinder is a strong advocate of a mandatory "poo wiping 101" class. That way we'd get more graduates interested in creating a clean restroom environment instead of pushing it around or destroying long-sleeve dress shirts.
I can't help but chuckle when someone is 100g in the hole on student loans with a degree in east european literature.
