End student-loan profiteering
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AS TUITIONS skyrocket, more students are being priced out of a college education. Today, Pell Grants, which help finance the education of students from low-income families, can cover only 30 percent of tuition costs, down from 50 percent a generation ago. The federal government already provides some direct loans to students, granting $20.1 billion to students in 2008-2009. Yet, far more student loans - $56.7 billion in the most recent academic year - came from private banks that make government-guaranteed loans to students. This arrangement offers little benefit to the public; banks are paid by taxpayers for making no-risk loans that are insured by the government.
On Wednesday, though, House Education Committee Chairman George Miller introduced legislation, with President Obama’s support, that will eventually remove private banks as intermediaries in the federal student loan system. Miller noted that the credit crisis has pushed up interest rates on federally subsidized student loans from 3.4 percent to 6.8 percent by 2012. Direct federal lending better shelters student loans from the market, and also saves the public money. The Congressional Budget Office estimates that relying on the federal government for loans will save taxpayers $87 billion over 10 years.
This taxpayer money is urgently needed to provide aid to students for whom a four-year college is out of reach. Earlier this week, Obama proposed to infuse $12 billion into community colleges. Another block of savings will give extra funding for Pell Grants and link them with cost-of-living increases.
In this economic climate, Congress must fix the broken system that unnecessarily takes money from taxpayers and students. Educational investments should go straight to students.
