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E-PrinceOn Sept. 19, 2009, the U.S. House of Representatives passed the Student Aid and Fiscal Responsibility Act (SAFRA). In addition to other provisions, SAFRA would reform the system by which the federal government spends money to fund student loans ...(back to the article)
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Federal money = money taxed away from private workers.
That's how these loans are paid for. Interest rates are kept artificially low which causes prices to rise. Why don't you think of the people you're stealing money from when you talk about this subsidization?
Dear Editor, you might want to check these facts. The CBO's July 29th statement determined that SAFRA will "increase direct spending by $39.4 billion and discretionary spending by $6.3 billion over the 2010-19 period."
Also, the student's interest rates under the FFEL program are NOT subject to enormous market fluctuations since they are fixed at 5.6% and 6.8% for subsidized and unsubsidized loans.
Neville, your argument is pure disinformation. You wrote:
---The CBO's July 29th statement determined that SAFRA will "increase direct spending by $39.4 billion and discretionary spending by $6.3 billion over the 2010-19 period."---
This claim is highly deceptive, as is clear if one bothers to read the CBO report.
Look at the report here: http://www.nchelp.org/elibrary/BudgetReconcilia...
From the page 1 summary:
"On balance, CBO estimates that enacting H.R. 3221 would reduce direct spending by $13.3 billion over the 2009-2013 period and $7.8 billion over the 2009-2019 period. Assuming appropriation of the necessary amounts, implementing the bill would increase discretionary spending by at least $13.5 billion over the 2009-2019 period."
As I read the passage, SAFRA would increase total spending by less than 5 billion over a ten-year period, not at all close to the roughly 45 billion your comment suggests. This slight total increase would result from spending more money on things like reduced interest rates for student borrowers, increased Pell Grants. It would pay for virtually all of this by ending many tens of billions of dollars in subsidies to private lenders.
You also wrote:
---Also, the student's interest rates under the FFEL program are NOT subject to enormous market fluctuations since they are fixed at 5.6% and 6.8% for subsidized and unsubsidized loans.---
From the CBO report:
"Under the bill, the borrower rate would switch to a variable rate formula. The rate charged would be equal to the 91-day Treasury bill rate (calculated as if it were equivalent to a bond) plus 2.5 percentage points, and would be adjusted annually each July. Because the rate would be capped at 6.8 percent, borrowers would
never pay an interest rate higher than the 6.8 percent they would pay under current law"
Exactly why should US taxpayers subsidize education at expensive private universities with large endowments when state schools are facing financial strictures? 5.6% and 6.8% interest rates won't cover the administrative costs associated with these loans. You'll have to hire more government workers including processors, supervisors, auditors, etc. You get an education but what does the taxpayer get? A bill for the ever increasing size of government programs. Perhaps if all government loans were in fact training costs and recipients were required to perform some type of government service for a specified period after graduation the taxpayer would see a return on their investment. The longer the service the more rebate the individual receives on the loan. This has worked successfully in smaller targeted programs like medical school and some teaching programs so why not expand the effort? Additionally with the growth of on-line instruction government needs to review the need for attendance at brick and mortar institutions for four or more years. The Harvard extension program has been hugely successful with the students having almost as much access to the professors and TA's as they would have if they attended classes in Cambridge. It has been so successful in-residence students mounted a program to ensure the on-line student diplomas carry a notation that the graduate was an on-line student. Still the on-line students seem to be doing well in graduate school admissions substituting their real life experiences for extracurricular activities. Since an on-line education is much less expensive than a residential program shouldn't there be some qualifying reason for providing a loan for attendance in residence? Certainly with those majoring in sciences the need to access a laboratory would qualify but what need is there to attend a brick and mortar institution if your major is History or English or even Mathematics? Shouldn't the Prince staff be reviewing alternate methods of achieving the goal of an education without increasing the costs to the taxpayer?
Three of the above posts are ideological garbage and shouldn't be read as sensible criticisms of what the bill would do.
'11
Perhaps you should read a good economics book, rather than the bible of Keynes. Keynesianism is nothing but totalitarianism shrouded behind mathematical jargon.
Also for Neville, FFELP interest rates are NOT fixed. 6.8% is the MAXIMUM allowable interest. If there was actual free market economics within the FFELP system - the rates would fluctuate with a highest of 6.8% Since there is no competition - as financial aid directors steer students into those providing the institution with the best terms (i.e. free software, IT infrastrucutre, IT support, etc; or, what until reforms of 2007 were plain old kickbacks), every loan has the maximum rate.
But that's important to note. You see, Sallie Mae has to pay for the fuel in their Three (yes, three!) corporate jets. Their CEO Albert Lord has upkeep on his three (yes three!) mansions and his personal, private 18-hole golf course!
This isn't about ideology, it's about wanton greed by useless middlemen who are leeching off what is already a government program.
In a Washington Post Article Feb 10, Secretary of Education Arne Duncan was quoted:
"We want the American public to have full knowledge of what's happening here, the reality," he said in a telephone interview. Private lenders "have had a very sweet deal. . . . Our proposal is infinitely better for middle-class, working-class Americans."
I for one am overcome with joy that the Education Secretary has decided to come clean and tell the American public what is really going on with this reform. What we need is college cost reform.
First, there are no savings with the Administration’s proposal. Who is being subsidized? Last year lenders paid the Federal Government $11 billion for the pleasure of making loans to students. That’s because students are paying a government-imposed interest rate on their loans that is higher than the current interest rate market. That $11 billion should have been returned to students but the Federal government believes they know how to better use your money.
Second, there still is no savings. Under the President’s proposed student loan reform the profit the government makes on your student loan payments is defined as savings. Thank you congress for creating arcane and dangerous budget rules. The tens of billions of dollars in savings touted as wasteful lender subsidies is really profits from students. You can bet they are laughing hard on pulling off that Houdini on the public.
So if you have a student loan, you should feel good that your student loan payments are being used to give someone else a grant. They may be going to Princeton. Hey, if you have a grant and a student loan, congratulations, you’re funding your own grant. What magic will they pull next? Tens of billions of dollars of your student loan payments are also going to help community colleges build new buildings, state governments to create early childhood development programs, reduce the federal debt and a host of other pet government projects. If Mr. Duncan is sincere about helping the middle/working class then any purported savings/profit should be used to reduce student borrowers’ loan payments.
So give us college cost reform. Drop the politics and government takeover frenzy and focus on the real causes of run away college cost. GIVE US A BREAK!
Well this is wonderful, the government is taking over. Here comes the Communism. First of all, need-based financial aid is the greatest perpetrator of rising college costs: suddenly, everybody has the right to a college education without actually paying for it. I know people who pay less than $1000 per year to go to Princeton. The full ~$50k price tag is to subsidize people like that, and since 50% of Princeton is on grant-based financial aid, families like mine are made to pay for other people's educations. It's pretty damn sick. God I miss Ronald Reagan.
Old Nassau,
You are clearly familiar with the legislation, so you must be aware that the majority of savings are based on student loan interest rates that are scheduled to increase in 2012-2013. Are we really to believe that a spineless Congress is going to double student's interest rates in this economy? No! But that’s what the current law says, so that’s what the CBO scores. These savings for SAFRA that will never materialize.
Franklin,
Sallie Mae was once a gov't agency. It's excesses are the result of the Frankenstein monster that the federal gov't created. The monopoly that SAFRA creates will make the Direct Loan Program "Return of the Son of Frankenstein."
BTW, if linking student loan rates to market rates were the key to success why not just make that simple change in FFEL, instead creating another entitlement?
I'm sure we all can agree that SAFRA does nothing to stem the cost of education. Higher Education costs have risen at 4-times the rate of inflation for the past 30 years. Reform student lending ahead of reforming the enormous cost of Higher Education is only treating the symptom, not fixing the problem.