Congress Poised to Tackle Student Loans

[Jul 15, 2007.]

 

The $85 billion-dollar student loan industry is now under Congressional scrutiny.

Education committees in the Senate and House have O.K.'d legislation designed to overhaul the country's student loan program. The overhaul is designed to help increase financial aid to students and make it easier for recent college graduates to repay their loans.

In recent months, investigators at both the federal and the state levels have uncovered conflicts of interest involving lending institutions, government officials, and university leaders.

Senator Edward Kennedy was quoted as saying, "This legislation will help reverse the crisis in college affordability. It will restore balance to our broken student loan system by reducing unnecessary lender subsidies."

Under the Senate version of the legislation, subsidies to lenders would be reduced by $18.3 billion. The House would reduce subsidies by approximately $19 billion. Both pieces of legislation would earmark $1 billion for deficit reduction and reserve the remainder of the funds for financial aid for college students.

Meanwhile, the House education chairman, Rep. George Miller, was quoted as saying, "This is the biggest single investment in college financial aid since the GI Bill."

Still, lenders worry the legislation will cut benefits to students through the subsidy reductions. In fact, some lenders might be led to quit the student loan business altogether as a result of Congressional action.

The Executive Director of America's Student Loan Providers, Kevin Bruns, stated, "The budget cuts would make student loans uneconomical for lenders. One would have to suspend the law of economics to believe these cuts won't be passed on to students and parents in some fashion."

The controversy comes at a time when families are more worried than ever about college finances. With the cost of a college education ever on the increase, students must turn to loans to pay the cost. And some of those loans could keep them indebted for years, preventing them from buying their own homes and making other major purchases.

Julie Ann Amos
July 15th 2007

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