In the News: Obama’s Student Loan Plan Under Attack
ARCHIVE STORY – Remember the President’s plan for student loans that I told you about a few weeks ago? Obama wants the federal government to directly disperse student loans via the Department of Education, rather than the current system of guaranteeing the loans made by private lenders like Sallie Mae. Well, according to this recent story in Politico, some Congressional Democrats aren’t all that thrilled with the idea.
Apparently, their issue isn’t so much with who disperses the loans, as it is with Obama’s plan to use the savings ($94 billion over 10 years) to increase funding for the Pell Grant. Senate Budget Committee Chairman Kent Conrad (D-ND) and House Appropriations Chairman David Obey (D-WI) seem concerned about creating a new entitlement program out of the Pell Grant. (I explained Obama’s proposed changes to the Pell Grant here, but the bottom line is this: The President wants to institute an annual cost-of-living increase in the value of this grant for low-income students, rather than submitting it to the annual appropriations process in Congress.)
The Congressional Budget Office, which assesses the financial impact of all proposed legislation, is reporting that Obama’s student loan program could actually save more than initially projected. When he announced the plan, Obama’s office indicated that it would save roughly $47 billion in 10 years. The CBO, however, figures the real savings would be double that — nearly $94 billion in a decade. Given the American people’s distrust of the credit industry these days, that kind of savings — which would come right out of the pockets of private lenders — may be too sweet to pass up.
In other news, the notion of a student loan bailout is gaining national momentum. Business Week reported last week on the growing popularity of Robert Applebaum’s “Cancel Student Loan Debt to Stimulate the Economy” Facebook group. I posted about about Applebaum a few months ago. He’s the guy who says that forgiving student loans is the best stimulus package of all. His group, along with the StudentLoanJustice.org (a la Alan Michael Collinge, author of The Student Loan Scam), features prominently in the Business Week piece. It’s definitely worth a read.