Here’s the Beef: Paying for College
“Obama proposes college loan plan,” declares the headline of Ohio University’s newspaper following a conversation about financial aid with Sen. Obama. The article backs it up:
Obama confronted the problem by announcing a proposal today to eliminate private student lenders from the loan process.
“By removing private lenders from the process and requiring that all federal student loans be provided by the federal government, we’ll save billions that we can use to make college more affordable,” he said.
Obama said his plan would have saved taxpayers nationwide roughly $6 billion this year alone.
…“We shouldn’t provide billions of taxpayer-funded giveaways to private banks when young people all across the country are trying to figure out how they can finance an affordable, accessible college education,” Obama said.
…At least 200,000 students were qualified to go to college but didn’t because of financial limitations, Obama said, citing tuition increases over the past five years of 11 percent at private universities and 35 percent at public institutions.
As someone on the verge of returning to school, this particular issue resonates with me. The subsidized federal student loans are a huge help to students, since the clock doesn’t start ticking (and hence interest doesn’t start accruing) until six months after you graduate. That gives you a chance to get your feet under you before your debt starts growing in leaps and bounds.
The often predatory practices of many private lenders mean students are immediately in the hole, accruing interest on their debt years before they’re in a position to begin paying it off.
Sen. Obama is making sense on this issue — which may well be an important part of his popularity among young people. As the article notes, “Obama said he noticed the college-aged generation taking a deeper interest in political issues and attributed it to issues such as college loans, climate change, federal debt and globalization.”
February 10th, 2008 at 1:09 pm EST
Just one clarification for you….the subsidized student loan is determined by the results of the FAFSA and the school’s certification of the student’s subsidized loan eligibility. It is NOT determined by whether the student loan comes from the Direct Loan program or from a lender in the FFELP industry. Students who borrower from FFELP providers get the benefit of a subsized loan if they are eligible for it; in addition, they get the benefit of lower or zero origination and default fees depending on their lender. In the Direct Loan program, fees are mandated and borrowers are not given a break on them.
I don’t agree with the practices of SOME of the larger FFELP providers like Sallie Mae and others that have gotten too big over the years. But there are many honest, nonprofit FFELP providers out there who reinvest their profits into their borrowers’ pockets by giving them substantial discounts on their student (and parent) loans.
February 10th, 2008 at 1:26 pm EST
Thanks for the important distinction, Katie. And thanks for reading the site.