May 5, 2008

Congress passes new student loan legislation

Posted in Misc at 8:09 AM by Joe From Boston


Last week, botht eh Senate and the House passed teh “Ensuring Continued Access to Student Loans Act of 2008” and it’s heading to President Bush’s desk next.  Bush has already indicated he will sign it.

I need to tell you that I have problems with this legislation.  Like most knee-jerk legislation, it’s a band-aid.

In simple terms, this bill will permit the federal government to purchase loans from lenders, essentially creating what’s called a “secondary market” – a market where lenders can bundle and sell loans to other companies , a common practice.

BUT – in this case it’s a false secondary market as it’s the taxpayers who will be fitting the bill.

My message to Congress – your legislation last year helped create this situation.  While the federal government seems to think it’s OK to operated at a net loss, private industry MUST make a profit in order to function.  It’s just basic economics.

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3 Comments »

  1. After seeing that this bill had passed I had a hard time believing this would help anything or anyone. Its great that loan amounts have increased but that is not going to stop colleges from raising tuition.

    Hey you got more money? Great! Oh yeah by the way we need to raise tuition just a bit to pay for that new stadium we built for the football team no one goes to see (true story).

    You hit the bullseye. The people who created this problem realise their “Frankenstein Monster” will not simply go away. So now they are trying to figure out what to do.

    I can honestly say that I am glad I went to school when I did!

  2. Hi Cheryle,

    Unfortunately your suggestion is illegal. It literally takes an act of Congress to change federal student loan interest rates.

    Student loan interest rates are not the same as the interest rate that the federal government keeps lowering.

    Also, since the federal government cut lender subsidies last October, student loans are either no longer profitable or the profit margin is so low that lenders have gone out of business or dropped out of student loans (hence the “student loan crisis”we keep hearing about). They have no savings to pass on to the borrower – they’re barely scraping by.

    It’s not like the oil and gas companies which are pulling in record profits while we struggle to pay for a tank of gas. Just yesterday First Marblehead laid off more than 60% of its employees.

    Plus, since this bill is being paid for by you tax dollars, it’s costing YOU much more in the long run than you would ever get if your interest rate were lowered.

  3. cheryle said,

    Since interest rates have continued to drop it would be prudent to pass the savings along to the borrowers!


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