Obama Takes on Student-Loan Lenders
President Obama went on the offensive today, telling student-loan companies that he was prepared to fight them over his plan to end bank-based lending.
Lenders “have mobilized an army of lobbyists,” he said in a speech that was introduced by Stephanie Stevenson, a financially struggling college student. “They are gearing up for battle. … So am I.”
“And for those who care about our future,” he added, “this is a battle we can’t lose.”
Calling government subsidies to lenders “wasteful and inefficient,” Mr. Obama argued that taxpayers’ money should be spent on students, not special interests.
“It’s about whether we want to give tens of billions of tax dollars to special interests or whether we want to make college more affordable for eight and a half million more students,” he said. “I think most of us would agree on what the right answer is.”
Again I say:
I have been more than a little irked to hear pundits & pols proclaim their concern for the indebtedness of future generations when they’re happy as clams to let students go deep into publicly subsidized student loan debt and sit by silently as nothing is done to shore up the broken public education system.
- Reforming Student Loans: The guaranteed student loan program pays banks and other lenders a guaranteed rate of return and reimburses them for defaults, giving them large profits set by the political process rather than won in a competitive marketplace. The Obama-Biden Administration will expand the alternative Direct Loan program, which is administered by private sector companies selected through a competitive process and paid based upon performance. Direct loans have essentially the same terms for students and are more reliable and efficient. They will save $48 billion over the next decade according to the Office of Management and Budget, which will be reinvested in Pell Grant scholarships for students.
- Restoring Pell Grants to a Strong Foundation for Student Aid: The value of Pell Grants have fallen from 77 percent of the cost of attending a public university to 33 percent over the past three decades. The ARRA invested $17 billion, making it possible to increase Pell by $619 for 7 million students. But these funding increases are only temporary, and without additional resources the value of the maximum Pell Grant will fall by $1,400 in 2011. President Obama is committed to a strong, reliable Pell Grant program. He will make Pell an entitlement, provide $116 billion over the next decade to prevent any drop in the size of Pell Grants, ensure that they continues to grow faster than inflation, and eliminate the frequent budget shortfalls that have plagued the program.
- Cut Taxes on College Tuition: The ARRA created the American Opportunity Tax Credit, which will give millions of families up to $2,500 each to help pay for college. The credit was also expanded to help families too poor to owe income taxes. But the credit expires at the end of 2010. The President’s Budget would make it permanent.
- Make a New Commitment to College Access and Completion: Only 65 percent of students starting at four-year colleges – and 38 percent of students starting at two-year colleges – earn a degree within six years. The President’s Budget includes a five-year, $2.5 billion fund to improve college access and help America’s colleges and universities graduate more students. The fund will identify, test, and promote what works in boosting college enrollment and persistence.