A new college loan program, attached to the health plan recently passed by lawmakers, allows the government to directly loan money for college tuition to students. President Obama signed the legislation in March with the intention of helping increase accessibility to colleges.
The new law:
- Does away with fees that banks charge for providing such loans
- Expands Pell grants
- Puts limits repayments of loans
- Provides billions of dollars to community colleges for specific career training programs
The White House emphasizes that changes to the loan program will aid potential college students in getting needed funds to attend higher education institutions.
Jason Delisle, director of the Federal Education Budget Project for the Education Policy Program at the New America Foundation, participated in a PBS Newshour discussion with Renee Mang, Senior Vice President of Sallie Mae Servicing Corporation, about the new policy and how it would affect private lenders, as well as students and families.
Mang argued that the regulations will cost the private company, who processes government loans, thousands of jobs, while taking away lender choice for families. Delisle points out that the new regulations will:
- streamline the process
- not change loan programs for families and students
- reduce or eliminate taxpayer subsidies that go to lending institutions
Opponents of the loan changes argue that it is a detriment to an economy trying desperately to bounce back from the recent recession.
“Critics of the overhaul say the action will reduce students' lending options and eliminate the jobs of thousands of private lenders, hurting efforts to remedy an ailing U.S. economy that has a 9.7 unemployment rate.”
Opponents also argue that it is also another example of government taking over a role that should belong to private business.
Students in the United States are dealing with increasing debt problems of thousands of dollars. The rise in interest rates has made it difficult for some students to continue repaying loans, and is affecting who is able to attend college at all. Colleges, whose budgets are often cut when federal or state funding decreases, suffer financially. And in trying to recoup money for expenses, they may tack everything from recreation center fees, to parking fees, to additional administrative fees, onto the final tuition bill.
Regardless of any politics, financial advantage for banks, or financial advantage for the government, politicians from both parties have heard from their constituents regarding increasing college tuition costs.
Time will tell if the new college loan program works for the students wanting to obtain a post-high school education. In the meantime, parents and families are wise to begin planning, researching scholarships and grants, and saving early.
Additional resources for parents and families:
College Savings Plan Network: Find out about 529 College Plans and details, including contact information, for state-hosted college plans where you live.
