September 28, 2007
2 Democratic Candidates Call for End to Guaranteed-Loan Program
The student-loan industry, mired in controversy and facing major cuts to its federal subsidies, is not likely to see an end to its woes if a Democrat is elected president.
Two of the Democratic candidates — Sen. Barack Obama, of Illinois, and John Edwards, a former North Carolina senator — have called for eliminating the bank-based student-loan system and requiring all students to borrow directly from the federal government.
A third, Sen. Christopher J. Dodd, of Connecticut, would set up government-run auctions in which lenders that agreed to accept the lowest subsidy rate would win the right to make loans to students in a particular region. The auctions would probably drive many smaller lenders out of business.
Interestingly, the one likely contender who has not called for ending the Federal Family Education Loan program is Sen. Hillary Rodham Clinton, of New York, whose husband is credited with creating direct lending.
Jeffrey R. Andrade, executive vice president of the U.S. Education Finance Group, praised Ms. Clinton for not jumping on the bandwagon.
“The Clinton camp recognizes that a simplistic government takeover wouldn’t work and that there’s a role for the private sector,” he said.
Kelly Field | Posted on Friday September 28, 2007 | PermalinkComments
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I don’t understand why the private sector is involved in providing loans which are guaranteed and subsidised by government: the resulting abuses are entirely predictable and seem inevitable.
— Gavin Moodie Sep 28, 06:55 PM #
Clinton “recognizes that a simplistic government takeover wouldn’t work”? Somebody hasn’t read her health-care proposal, for example. Clinton has been for simplistic government takeovers ever since she discovered as a child that people won’t do what they should unless you force them. I don’t know why she appears to be taking an anti-Hillary position on student loans, but it probably has something to do with the primary obsession of the modern idealist — money — and I don’t mean money for students.
— S. Britchky Sep 29, 03:34 PM #
It appears that even Direct Lending has to outsource their service to private lenders because they just don’t have the infrastructure to administer the program. The benefit of not having direct lending only is that competition among the private lenders could benefit the students.
— finaid Sep 30, 05:10 PM #