By Brendan Sherwood
Barack Obama is ready to take a big step towards helping students pay for college. According to The New York Times, under his new proposal the federal government would provide loans for students directly, eliminating the need to subsidize banks and private lenders. It would also increase grants to needy students by keeping their grants above the inflation rate.
According to USA Today, Obama “wants to increase the discretionary budget for the U.S. Education Department to $46.7 billion, a 12.8% rise. Obama will save $4 billion a year by ending a long-standing government-subsidized college loan program.”
Mary Lou Kutchma, Associate Director of Student Financial Services at Marist College said it is always in her best interest to support more aid for needy students because she and the rest of her department are “advocates for students.”
She said, “The student lending programs should be re-evaluated to ensure that whether it’s Direct Lending or FFELP, the main goals are to service the students and families and provide access to higher education.”
While the proposal may sound like good news for students, it is bad news for lending companies. According to The Associated Press, “the budget announcement sent shares of student lending companies plummeting. Shares of SLM Corp., better known as Sallie Mae, sank 31 percent; Student Loan Corp. fell 22 percent; and Nelnet Inc. dropped 54 percent in trading Thursday.”
Obama’s proposal has banks and private lenders irritated and worried. According to The International Herald Tribune, some banks have lobbied against the proposal and even filed lawsuits against it. They claim that they can provide better service to students than the government can.
According to The International Herald Tribune, the director of America’s Student Loan Providers said, “There’s a huge apparatus for administering the student loan program that the private sector assumes, in terms of marketing the loans, servicing, distributing the loans, repayment, that is not on the platter of the federal government.”
Many education advocates are not convinced. According to The Los Angeles Times, Barmak Nassirian, associate executive director of the American Assn. of Collegiate Registrars and Admissions Officers and frequent critic of higher-education funding schemes said, “It’s visionary. You’d have to go back to Lyndon Johnson to find a commitment to education like this. This isn’t just more money, it’s intelligently spent money.”
Mary Lou Kutchma has experience with the subsidized Federal Family Education Loan Program and “has been pleased with the service and commitment the lenders have provided to the student loan industry.” She is most interested in how students are serviced.
She also wants to make sure students are aware of the fact that they are borrowing, not receiving free money, and are able to manage debt. One of her main concerns is that the federal government increases lending amounts.