Obama Spotlights Student Loan Reform
By Michael A. Fletcher
President Obama today touted his plans to cut banks out of the business of administering federally-guaranteed student loans, saying the choice comes down to supporting special interests or supporting financial aid for millions of students.
Speaking at the White House, Obama said that the change, which has drawn opposition from members of Congress from both parties, would save tens of billions of dollars. That money -- which has been estimated by White House budget makers to be as much as $48 billion over the decade -- would be enough to cover 95 percent of the cost of his plan to increase Pell Grants for students and peg future increases to an index higher than inflation.
"We have a student loan system where we're giving lenders billions of dollars in wasteful subsidies that could be used to make college more affordable for all Americans," Obama said.
Opponents of the plan have predicted that having the federal government handle all federally backed loans would lead to inefficiencies in the program, while increasing the role of government.
Pointing out that increases in the cost of college have outpaced increases median incomes in this country by ten fold in recent decades, Obama said that his administration sees the changes in the loan program as just one part of their effort to make college more affordable. In addition to increasing Pell grants, the administration has expanded tax credits for higher education, and is increasing funding for programs to help colleges retain and graduate students.
"This is not about growing the size of government or relying on the free market -- because it is not a free market when we have a student loan system that's rigged to reward private lenders without any risk," Obama said. "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 8.5 million more students."
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April 24, 2009; 3:10 PM ET
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