The Department of Education just released statistics about how many students defaulted on their loans during fiscal year 2007, and the results are rather depressing: the national default rate rose to 6.7 percent, up from the previous year’s… Read More
Today the House of Representatives took a step towards modernizing the federal student aid system by passing the Student Aid and Fiscal Responsibility Act. The act will eliminate the government subsidies and guarantees that private lenders get for… Read More
This weekend the Washington Times ran a lengthy feature about the myriad of problems college students are facing in the rough economy (hey, I wonder why no one else has thought of running that…). The article is pretty… Read More
President Obama’s proposed overhaul of the student-loan industry has ruffled more than a few corporate feathers and elicited the dreaded “S” word from people not named Rush Limbaugh (though I’m sure Rush would oblige if you offered him some Vicodin), so it’s high-time we provided a curt rundown of what the President is talking about. The BS-free version:
Under the current system, students choose among three different types of loans: federal direct loans made by the government, federally guaranteed loans made by banks and other private lenders, and non-guaranteed loans from private lenders. The government currently subsidizes federally guaranteed loans given by private lenders such as Sallie Mae, the largest student lender in the nation, while guaranteeing the amount loaned—effectively cushioning the lender from virtually all risk associated with lending while allowing private lenders to reap a healthy chunk of change in the process.
In short, it’s a pretty sweet deal for lenders that get a piece of the pie (read: Sallie Mae), but abuses and inefficiencies in the student-loan industry have caused many to doubt the efficacy of the current system.
More financial nitty gritty after the jump.