Obama calls for change in college loan system
WASHINGTON - President Obama renewed his call yesterday for the government to stop backing private loans to college students and replace them with direct financial aid.
"In a paradox of American life, at the very moment it's never been more important to have a quality higher education, the cost of that kind of education has never been higher. . . . Yet, 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," he said at the White House.
Obama wants to end the decades-old dual system the federal government uses to advance loans to students to pay for college. Under that system, students at some colleges borrow directly from the government, while others get loans from banks, nonprofits, or state agencies that in turn receive subsidies from Washington.
He says "middle men" lenders in the Federal Family Education Loan program add inefficiency to the system.
Obama has said that the change would save at least $48 billion over the next 10 years - money that could be funneled to student aid.
But Republicans are concerned about the costs of that, and even some Democratic lawmakers oppose the switch.
Senator Lamar Alexander, the chairman of the Senate Republican Conference, said ending a successful lending program and giving more power to Washington and Education Secretary Arne Duncan would not help students.
"Arne Duncan, I think, is the president's best appointee. But as secretary of education, he should focus on paying teachers more for teaching well and creating more charter schools - that's his agenda," said Alexander, a former education secretary. "I don't think Secretary Duncan came to Washington to be named banker of the year. The Department of Education should not be a $500 billion national bank."