Live White House Chat on Making College Affordable
At 5:30 p.m. Eastern Time today, Education Secretary Arne Duncan and White House domestic policy advisor Melody Barnes are holding a live chat on President Obama’s plans to make college more affordable. These efforts include increasing the maximum Pell Grant, keeping interest rates on federally subsidized student loans low, and ending subsidies for banks that put bank profits ahead of students and families.
President Obama is proposing taking the middle man -- banks -- out of the student lending process, and instead establishing a competitive process to choose the best lenders. Currently, taxpayers pay up to $9 billion every year subsidizing student loans issued by banks -- and banks turn a profit on the interest while taxpayers take the hit if students default. In response to the President’s proposal, the banking industry is spending millions of dollars on lobbying and ads to push back and protect its profits.
Education Secretary Duncan outlined what needs to change and how the President’s plan helps in an op-ed last week:
For too long, bankers have gotten a free ride from the U.S. Department of Education.
Under current law, taxpayers provide as much as $9 billion each year to subsidize guaranteed student loans issued by banks. The banks earn profits on the interest; if students default, taxpayers take the loss, not the banks. In other words, working Americans pay while bankers get rich.
Meanwhile, educators, engineers and computer scientists -- the backbone of the new economy -- face crushing debt from six-figure college tuitions. A study of national postsecondary student aid found that in 2008, two-thirds of college seniors graduated with debt averaging more than $23,000. That number will rise as public and private college tuition costs escalate.
The banks have had plenty of help with government bailouts and other subsidies while working families and students are increasingly squeezed. President Obama wants to eliminate the subsidy for banks and use that money to help poor and middle-class students and adults attend college. ..
The president's plan actually creates jobs and draws on free-market principles by selecting private companies through a competitive process to service student loans issued directly by the Education Department. These private companies, including Sallie Mae, compete for our business and are evaluated on the quality of their customer service and their default rates.
A version of the President's proposal has already passed in the House of Representatives and is currently awaiting consideration by the Senate.