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Wasteful student lender subsidies cut. Winner: students.
Congress finally ended wasteful subsidies to student lenders that diverted billions of dollars annually away from helping more students go to college. See OSPIRG's Federal Higher Education Advocate Rich Williams in the NYT.
Currently, the federal government operates two major programs to provide loans to help students pay for college: the private sector Federal Family Education Loan (FFEL) program and the government’s Direct Loan (DL) program.
Former President George W. Bush’s last two budgets revealed that the bank (FFEL) program costs taxpayers billions of dollars more each year to run than does the DL program.
From 1992 to 2004, the cumulative taxpayer subsidy costs were $39 billion for FFEL loans, and only $3 billion for Direct Loans. For a typical college student’s debt of $20,000, the federal government spends nearly $2,200 more in subsidy costs for a loan through the FFEL program.
Building upon that evidence, President Obama this year proposed to eliminate the excessive subsidies to instead apply that money to financial aid. program and the government’s Direct Loan (DL) program.
The final result: HR 3221, the Student Aid and Fiscal Responsibility Act of 2009, which passed the House of Representatives this week. On to the Senate!
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