Banks on Verge of Losing Student Lending Business

[midnight]

Private lenders have conducted an all-out lobbying effort against the bill, arguing it would cost thousands of jobs and unnecessarily put the program in the hands of the government.

"The industry plays a role in maintaining competition and choice," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, an industry group. "If the government is the only lender, there is no choice."

Under the college lending program, financial institutions provide college loans at low interest rates, and the government guarantees the loans in the event of default and subsidizes private lenders when necessary to keep rates low.

"This is a case of corporate welfare, a giveaway to bankers and to Sallie Mae," said Sen. Tom Harkin, D-Iowa.

Republicans portray the direct lending plan as part of a pattern of government takeovers. Citing the health care bill and the government's bailout of the financial and automobile industries, Sen. Judd Gregg, R-N.H., said the student loan bill "is the fourth major step forward in the push to drive this country down a road towards a European-style government."



I'm not sure, but I think European-style government is code for more Socialism.


http://www.foxnews.com/politics/2010/03/24/banks-verge-losing-student-lending-business/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxnews%2Fpolitics+%28Text+-+Politics%29

[RKP5637]

1. I would like to see the middlemen gone! n/t

[melm00se]

2. banks DO offer a value add here

they have the infrastructure to process the payments, service the loan and process all the necessary paperwork and seeing they already do that for all the other consumer style debt in the USA, I might even suggest that they are far more expert at it than the government is (or could be at least for a decade or so).

This is a business decision: why do it yourself, at a potentially greater cost, when you have a built in industry that can and do it effectively, efficiently and, probably, for less $$$?

[sendero]

3. You are wrong..

... banks have abused this program. Student loan interest rates are USURIOUS.

Fuck the fucking banks, they don't deserve to have this franchise and they idea they can do it cheaper is ludicrous.

[Tailormyst]

4. Except that they jacked up the rates

It's yet another thing that we should be doing as a people for our young ones without someone becoming a fucking billionaire over it. We can do it for far less.

[melm00se]

5. "they" jacked up the rates?

Stafford Loan rates (these are the subsidized loan rates) follow this schedule:

Stafford loans carry a fixed rate throughout the life of the loan. The rate may depend on your year in school when the loan is disbursed and whether you are a dependent or independent student at that time.

* The interest rates for subsidized Stafford loans for undergraduate students are:
- For loans first disbursed July 1, 2006–June 30, 2008, the interest rate is fixed at 6.8%.
- For loans first disbursed July 1, 2008–June 30, 2009, the interest rate is fixed at 6%.
- For loans first disbursed July 1, 2009–June 30, 2010, the interest rate is fixed at 5.6%.
- For loans first disbursed July 1, 2010–June 30, 2011, the interest rate is fixed at 4.5%.
- For loans first disbursed July 1, 2011–June 30, 2012, the interest rate is fixed at 3.4%.
- For loans first disbursed on or after July 1, 2012, the interest rate is fixed at 6.8%.
* For all subsidized Stafford loans disbursed to graduate and professional students, the interest rate is fixed at 6.8%.
* For all unsubsidized Stafford loans disbursed to undergraduates and graduate students, the interest rate is fixed at 6.8%.
* The interest rate on Stafford loans first disbursed on or after July 1, 1998 but before July 1, 2006 is variable and may change on July 1 of each year, but will never exceed 8.25%. The rate is based on:
- The 91-day T-bill rate +1.70% during repayment periods.
* Starting July 1, 2009, the interest rate on variable rate loans during school, grace and deferment periods is 1.88%.
* The 91-day T-bill rate +2.30% during repayment periods.
* Starting July 1, 2009, the interest rate on variable rate loans in repayment is 2.48%.

these rates are set by the federal government.

Source: http://www.salliemae.com/get_student_loan/apply_student_loan/interest_rates_fees/#Stafford

Where there is a valid complaint is with the "private" loans which are not, directly, under the purview of the federal government as they are, by their name, loans by private institutions to private individuals for the purpose of college.

[sammytko]

7. i have a small Stafford loan and the rate is very low

They do not let you borrow more than you can afford to pay back. I even had to take a mini test before the application process continued. Its all done on-line and very easy to use.

Well, it was easy for me.

[Orsino]

6. Bank loans are also bogged down by mandated executive and shareholder profits. n/t

[lonestarnot]

8. Banks do not offer shit. Stuff that value added bullshit.

[jpljr77]

9. FAIL: Federal Direct Student Loans

they have the infrastructure to process the payments, service the loan and process all the necessary paperwork and seeing they already do that for all the other consumer style debt in the USA, I might even suggest that they are far more expert at it than the government is (or could be at least for a decade or so).

The banks do have the infrastructure, you're right. But so does the Dept of ED. They do know a thing or two about lending to students and servicing the loans, you know. There is this thing called the Federal Direct Student Loan Program...

[blondeatlast]

12. FDSL seems very well run to me. I have one and if I ever have

a problem or question, all I do is pick uop the phone and speak to--wait for it, I am NOT joking--

a real, live, person with a friendly, efficient manner.

Whoever came up with that idea is an effing genius. One phone call and I'm satisfied and so is FDSL.

[alcibiades_mystery]

10. The higher cost in originating and servicing the loans

are more than offset by the lower social cost of breaking the bank's grip on education. The government is precisely NOT a business that should view purely operational costs. The government is a concretization of the social whole, and must therefore take social costs into account. And the social cost of privatizing the student loan business has been catastrophic for the social whole, however supposedly "more efficient" the operational costs have been. One dimensional thinking on operational costs has contributed to that catastrophe, and we must stop such limited thinking if we ever hope to get out of the mess wrought by unimaginative neoliberal profiteers.

[DBoon]

11. To me, "European style government" is a code word for 5 week vacations

bring it on

[muriel_volestrangler]

13. Meanwhile, the British Labour government is privatising its student loans

in a desperate fire sale of assets. From today's Budget statement:

And there is one other area which can help reduce Government debt.

I announced at last year's Budget a programme to secure £16bn through asset sales, and we are making considerable progress.

On the Student Loan Book, we are looking to appoint advisors in the next couple of months to develop a sales proposal.
...
We are also finalising options on the sale of the Dartford Crossing.

http://www.guardian.co.uk/uk/2010/mar/24/budget-2010-chancellor-alistair-darling-speech-in-full

Yes, that's right - they literally have a bridge to sell you (the Dartford Crossing is the easternmost bridge and tunnel on the Thames - a vital link in the orbital motorway around London. The next tunnel is 15 miles to the west, near the centre of London, so a private monoploy on the Dartforsd Crossing is worth a lot).

[annabanana]

14. I thought this was DONE already..

What's the status?