Banks vs. Education

These days, it is hard to come by an affordable education.  Universities and colleges are increasing tuition and fees every year to stay afloat during these difficult economic times.  But as the rate of tuition increases, the economy continues to falter just as American families continue to struggle to make ends meet.  The banks, however, have been benefitting from the increase in tuition.  The more expensive a school is, the more likely students are to take out loans from those banks that belong to the private Federal Family Education Loan Program.  Three-fourths of the United States’ college lending is carried out through this program and the private lenders involved receive a substantial amount of subsidies.  Now President Obama is proposing a brand new bill that will reform the system, and make college more affordable for average Americans.

When this subsidy was created, lenders weren’t exactly interested in the student loan business.  But now that Colleges and Universities are in the money making business, student loans are hot tickets to score.  President Obama’s bill, if passed, will “switch the federal student loan system entirely to direct lending from the government,” according to the New York Times.  The President claimed that this change could save $48-94 billion over the next decade.  The money saved could be transmitted to student aid.  Direct lending is said to be less expensive and more reliable.  But, naturally, the bill is facing a strong opposition.

Executive Director of America’s Student Loan Providers said, “The proposal does nothing to make college more affordable for the vast majority of students who require loans to pay for college.”  Private lenders are fiercely fighting this proposal, which they claim would be bad for business.  Apart from this accusation, conservatives fear that the new and improved (or not so much improved in their view) program will “grow government.”  According to the New York Times, “The loans would be handled through colleges, just the way Pell Grants are now.  The loans would then be serviced and collected by private companies that are already competing for this lucrative business.”  

This new federal system of direct student lending, will not terminate an enormous amount of jobs but will hopefully create some healthy competition between private companies.  In order to regain a robust economy, colleges and universities must not fail to educate the next generation that will be infiltrating the job market.  While the banks claim that this will be bad for business, and there is no dispute that this may affect them in either a positive or negative way, more educated people is ultimately good for business, the economy, and the country.  It’s time to put politics aside, and put the wellness of the people and the country first.