[Vision2020] Obama Wants to Eliminate the Federal Family Education Loan Program

[Kenneth Marcy]

http://tinyurl.com/cu77xr 

WASHINGTON (AP) — President Barack Obama on Friday renewed his call for the 
government to stop backing private loans to college students and replace them 
with direct financial aid to young people, a challenge to a decades-old 
program with strong congressional support.

Obama's plan to eliminate the Federal Family Education Loan program could save 
$48 billion for taxpayers over the next decade, but critics warn it could 
turn the Education Department into a national bank. Lenders and some college 
officials oppose the proposal, which Obama backed as a U.S. senator and 
pushed during the presidential campaign.

"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," Obama said at the 
White House.

He was joined by Stephanie Stevenson of Baltimore, Md., a University of 
Maryland student, and her mother, Yvonne Thomas.

Under that system, students at some colleges borrow directly from the 
government, while others get loans from banks, non-profits or state agencies 
who in turn receive subsidies from Washington.

The president's proposal would switch the federal student loan system entirely 
to direct lending from the government.

Obama acknowledged that the proposal was sure to find critics, given the 
financial stakes. He warned banks and lenders were "gearing up for battle. So 
am I."

Republicans are concerned about the costs and even some Democratic lawmakers 
oppose the switch.

Sen. Lamar Alexander, 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."

Higher education groups are divided, although a petition against the plan drew 
signatures from college loan officers around the country. Universities 
welcome more money for student aid, but about two-thirds of colleges use the 
subsidized lending program and some want to keep the program.

Lenders are also fiercely lobbying against the proposal, which would end a 
historically lucrative business.

"The president's proposal to eliminate the Federal Family Education Loan 
Program will do more harm than good," said Kevin Bruns, executive director of 
America's Student Loan Providers. "The proposal does nothing to make college 
more affordable for the vast majority of students who require loans to pay 
for college."

AP Education Writer Justin Pope contributed to this report from Raleigh, N.C.

Copyright © 2009 The Associated Press. All rights reserved.