I personally currently owe $132,644.89 in student debt that is unresolvable in bankruptcy like most modern stdents this money is a mix of public loans, private loans and the public/private subsidized loan. By the time I am finished paying back my lending institutions sometime in the 2040s I will have paid more then $300,000 in principle and interest to pay for my education. Much of that money will be made as payments to private corporations as interest, this is commonly called profit.
Our progressive president has a plan to improve the student loan mess that has developed since higher education became a class status gatekeeper. Put simply the presidents plan will put more money directly into the hands of students who are desperate to get their hands on it and stop subsidizing banks that already make trillions in profits from student lending. Naturally this plan has come under fire from lobbyists and their democratic allies in congress. Please follow me below the fold for action and a fuller explanation of the problems and proposed solutions with student loans.
Right now, when you apply for student loans, you are faced with a number of different systems. The programs have different names depending on whether you are applying for undergraduate or graduate loans but the structure is the same.
My fiance just applied for next years loans for her doctorate in Physical Therapy so I will use her example to demonstrate the system.
First and most desirable for the consumer is the direct government loan or Pell Grant, currently this will either have a O% or very low fixed interest rate or even be grants which do not have to be repaid, however, a student can only acquire limited funds from this loan and grant program regardless of income level or cost of education, these grants are the most desirable my fiance couldn't get them.
Then you take direct government loans, these are not bank loans they have a very low fixed interest rate (currently about 4.5%). These loans might be enough to get someone through a low cost state institution. However, they fail to cover a high cost private institution including most post-graduate work.
Then you take subsidized loans, these are loans made from private lenders with government backing, the industry loves these, they can then charge higher interest rates (my fiance's, that she just applied for, are subsidized loans at 8.5% on top of her direct federal money). The bank gets to make their profit margin but has little or no risk associated with that profit.
Finally, comes the least favorable loans, full private lending, these are loans with huge profit margins, current rates are about 13% (my fiance found this out well applying but fortunately did not need to take them). These are a last resort.
Right now, I personally need about $4500 dollars to pay for a Bar review class and support myself for the 2-3 months between the end of law school and the bar exam and no one will give it to me even privately at high interest.
Student loans like everything else no longer provide better access to higher education but are instead a huge risk free, financial industry with huge profit margins.
President Obama is fighting for students against bankers, he wants; instead of subsidizing bank loans, to take the $94 Billion and give it directly to students.
This is great we need the money to fund higher education, we need to use student loans to allow access to a better live without requiring identured servitude (my post-graduate monthly payments will be approximately $1700 a month).
This has started a nasty little backroom lobbying and committee war. On our side is the United States Student Association which is currently conducting a phone campaign on the hill as in today, unfortunately there website does not have a call center for outside activism so here is the link for your congress critter from the map
Here's the Senate.
This plan is also likely to be opposed not on the merits but because of turf war as it gives power to the budget committee at the expense of appropriations. Source So you need to particularly contact congresscritters on appropriations and tell them that their little empire is less important then access to higher education.
Oh and if anyone is in this assholes districts he's a D from Pennsylvania who appeared next to the head of SallieMae in a recent interview let him know that Students are more important then Sallie. Kanjorski (D-PA) linked above is firmly in SallieMae's pocket and is spearheading their lobbying effort to stop the president from moving this money from a bank subsidy to direct student aid. Let him know this is not Ok especially if you live in his district PA-11, NE PA next to Jersey, he only won in 2008 with a 52-48 margin, I don't know any of his prior positions but his position on this pisses me off. I let him know about it so should you.
Students before banks in Student Lending!
Cross posted at Congress matters