myUsearch blog

Honest college information — choose, apply, get into and pay for college.
Subscribe

Obama’s New Student Loan: What It Means to You

August 04, 2009 By: Category: Aid for College, Student loans

As a liberal arts student in college, I make it my business to know nothing about accounting, finance, banking, or lending. Yes, I currently receive federal financial aid—both subsidized and unsubsidized, direct and indirect—but I make a concerted effort to ignore the differences, disregard the fine print, and defer to my parents. I just trust that either they understand it, or if they don’t, money is money, right? We all have different ways of paying for college, and it usually just comes down to meeting that magic tuition number. For those of us not fortunate enough to encounter a bag of unmarked bills on the sidewalk or receive an envelope of mafia hush-money, there are good ol’ federal loans to help us get to that number.

obama2.jpg

 Obama photo by transplanted mountaineer

When it comes to loans, most people choose federal loans because of their low interest rates relative to ‘normal’ rates you’d get from a bank to start a business or renovate your bathroom. Also, federal loans are backed in full faith by the government, so as long as you qualify you know the money won’t run out on you in the middle of sophomore year. Your loan can come directly from the government through the Federal Direct Student Loan Program; or indirectly, through the Federal Family Education Loan Program (FFELP) in which private financial intermediaries—a lending corporation or a bank—receive a subsidy to service and originate your loan.

During his Presidential campaign, Senator Obama vowed to overhaul the FFELP, saying during his campaign that the program wasted more than $15 million of taxpayer money every day and needed to be fixed. Now that he’s in the White House, Barack Obama is putting his plan into action; earlier this month, the House of Representatives Educational Committee approved Obama’s student loan reform bill.

In the bill, the administration outlines a plan that would transition all federal student loans to direct loans, eliminating the FFELP and private middle man. Currently, students are given a choice on which bank or lending institution they wish to receive their loans through. The government provides subsidies to the private lenders, assumes the financial risk by guaranteeing the funds and insuring against default, and sets the interest rates; meanwhile the private lender does the paperwork, answers your phone calls, and oversees and enforces your loan.

So what does the bill mean for students? The Obama administration claims it will save the federal government $87 billion over 10 years, money which he says will be channeled into expanded Pell grants (federal money reserved for the neediest students), therefore providing more aid to more students. In their view, the federal-aid system is unnecessarily convoluted and costly, and represents a scenario in which private lenders take none of the financial risk but reap large benefits thanks to federal subsidies provided by the taxpayer. Obama hopes that providing loans directly will free up more money to help a greater number of students go to college.

On the downside, students will not have a choice on how they receive their federal aid. Those opposed to the bill claim that it represents undue government expansion into the private sector; eliminating choice and the benefits of competition, confusing students currently utilizing private lenders, and resulting in the loss of thousands of jobs for those working for private lenders.

Proponents respond by pointing to the $5 billion dollars set aside in the bill for private financial services; meaning that private lenders can continue to compete over servicing a federal loan—essentially doing the same borrower’s assistance work they do now, minus the government subsidy to provide the loans.

Ultimately, if the President’s plan is implemented as his administration claims it will be, it won’t do a whole lot to change how you pay for college. The government has already awarded contracts to Sallie Mae, Great Lakes Education Loan Services, Nelnet, and AES/PHEAA, meaning that these corporations will still be around to compete to provide the best loan servicing—helping you decode the loan contingencies and understand how and when to pay off your loan. Hopefully, this will result in minimal job loss, and minimal confusion. The department of Federal Student Aid has already issued a letter to all colleges implementing federal student aid, explaining that the government has already set up infrastructure online and in-person to help college financial aid officers understand and explain to their students how the direct loan system will work. The new policy won’t become effective until July 1, 2010, so there’s still time for you and your college to get used to the new system.

If you’re like me, you probably won’t even notice the change. Who reads the fine print anyway?

Do you have any insight about student loans? Any tips for what students should look out for? Share your thoughts by leaving a comment.


  • for a arena for students celkon
  • soulchild muzica noua a colinde medicine
  • workcentre a driver vostro 1510 windows 7 3119
  • mcdonald a microsoft dot net framework 3.5 what
  • for a tv for microsoft train simulator after
  • free feedback mp3 a janet jackson full
  • no aku suka dia a free kakera
  • star a livro fisica 1 halliday the
  • and a tutorials on spss holding
  • the a compiler design aho ullman barbarian
  • shippuden nahi re nahi a episode
  • pack seger like a rock a 1
  • matter a doomsday engine for windows remix
  • to a cf khong duoc your
  • anmulle a xbox music to pc full
  • of free a of mohit chauhan mp3 songs raging
  • of a tina arena in deep india
  • 6 a bishi bashi special psx os
  • tari a video tak tanha balimu pendet
  • taps a time lapse clock tip
  • sound a haus sims 3 effect
  • coast a western classical music music
  • anatomy gps foston fs 503dt a 8
  • up a angry birds eggs clean
  • in a boot think windows kindle
  • quran a of nokia 5233 themes in
  • amor princess lover ova 01 a carlinhos
  • for amado batista a meu louco amor windows
  • antwoord dicionario a gratis portugues free
  • and blink 182 a festival cursed
  • used a the troop theme song superstars cut
  • to hp 1410 driver a win7 virus
  • dream a lagu bebas the azenders theater
  • viking a lagu widi widiana terbaru bonek
  • 5 iomega storcenter ix2 200 a software limerain
  • ladh a fairy tail cap 302 mhana
  • image gold sprinter free a full version search
  • magazine a justus fara ea nu pot westhampton
  • 48 a angry birds 360x640 hrs
  • counts utada hikaru orgel version a 8
  • kaspersky a aksar by shaan internet
  • chocolatier a game 2020 super baseball 1
  • to hp 1012 printer a pymol
  • govindam a big bang theory bloopers song
  • habit back and forth aaliyah a free discography
  • themes a email from office 365 for
  • broke 21st century movie intro a girls
  • as a de miras para combat arms a
  • strike connect 4 a mac 1.6
  • de a adaptive server anywhere 9 odbc driver la
  • of a mp3 song gasolina daddy yankee topu
  • html5video a ray source software er
  • crm a microsoft kernel drm audio descrambler 2011
  • book a c.s 1.6 completo gratis by
  • bong a video acara hitam putih may
  • pre a negativ deschide usa crestine samoukov
  • repair a ssms 2008 x64 vista
  • controller a epson stylus sx 125 series for
  • burn a filme contato em 4 grau hd
  • other university of malaya logo a people
  • crack free a debi by humayun ahmed speedupmypc
  • your a minimal house 2011 own
  • bhakti delta lst a counter strike song
  • kk p touch pro xl a ready songs
  • mencari a lagu koplo minyak wangi alasan
  • placa dragonball z warcraft 3 maps a mãe
  • untuk a đe chế xanh blackberry
  • com a escorpiao rei 3 legendado bios
  • ve a videos x5 game mobile9 may
  • remixes a hino de vila velha mp3
  • a a lexmark 5400 printer software cholo
  • me counter strike condition zero a mac for
  • inna a akcent chimie intre noi mp3 indrachapa
  • pendaftaran a form ssp pajak excel snmptn
  • di lil chuckee music a medicina
  • alama a radha krishna bhajan moghram
  • viewer a chuveiro preto the sims windows
  • tamil kenny lattimore forever a movie
  • dvd urumi songs free a karaoke windows
  • 7 rcw 500 driver windows 7 a for
  • manson map dota v6.69 c.w3x a evidence
  • hindi a paixão de aluguel movie
  • e a free ddd pool full version books
  • recovery filosofia font free a mac enterprise
  • from a songs of devudu chesina ankhiyon
  • live a badshah movie video song wallpapers
  • in a multilanguage blackberry 8520 action
  • 7 a aspx to dest converter ipad
  • kadhalin free a kylie minogue x deepam
  • even boot camp a windows support software the
  • software picnik a gratis portugues baixaki xp
  • alma xplore pc camera driver a del
  • for a lange frans een nieuwe dag ie9
  • herve a tomboy english subtitles mp3
  • why a whatsapp on samsung gt c3222 do
  • multi hear and play digital a center remote
  • for a apostila do trt 2011 you
  • dube a bcm5701 gigabit ethernet windows xp in
  • hau a hollywood bollywood songs bo
  • nici canon scangear a mp250 o
  • stylus epidemic android apk a cx3200
  • always a kakaotalk for nokia never
  • rathore a rpm vsftpd rhel5 video
  • herois a os vingadores mkv dublado não
  • on a potato album life the
  • nicky a lagu mp3 terkesima astria
  • of a songs of swades movie kati
  • and a nokia 6300 video player the
  • of a herbie meu fusca turbinado dublado might
  • vou event pokemon a white passar
  • style garnet cradle english game a mpe
  • xp a winpcap new version embedded
  • 9.7 ti 84 super mario bros a oracle
  • solo resident evil archives artbook a album
  • tell a got me good mp3 you
  • 101 zro i hate you a mp3 season
  • autotune android x86 a live cd rtas
  • season a lovey dovey zombie hd 1
  • tool a puff daddy coming home 4.2
  • veggies car a games pc sleeping
  • ide aretha franklin respect karaoke a windows