Obama Wants to Overhaul Student Loan System
April 24, 2009 - 3:13 PMPresident Barack Obama, saying the country has to be more competitive in the world, called anew Friday for overhauling the system of college lending.
The cost of higher education "has never been higher," said Obama, joined at the White House by college student Stephanie Stevenson of Baltimore, Md., a student at the University of Maryland, and her mother, Yvonne Thomas. The president said that tuition costs in America have skyrocketed, "putting new pressures" on families already hard-pressed in economically difficult times.
Specifically, he called once more for ditching a system in which the federal government for years has in some measure essentially acted as a middleman for banks and lending institutions making college loans to the young.
"There are few things as fundamental to the American dream or as essential as a good education," he said, adding that "the stakes could not be higher for young people like Stephanie" at a time of growing international competitiveness.
Yet, Obama said, "we have a student loan system where we are giving lenders billions of dollars in wasteful subsidies." He called the system "a paradox of American life" that threatens to widen the gap between the haves and have-nots.
The president said that by the end of the next decade, he wants to see America have "the highest percentage of college graduates" in the world, noting that it "used to have that" edge, but doesn't enjoy it any longer.
Obama wants to end the decades-old, dual system the federal government uses to advance loans to students to pay for college.
Under that system, students at some colleges borrow directly from the government, while others get loans from banks, non-profits or state agencies who in turn receive subsidies from Washington.
The president's proposal would switch the federal student loan system entirely to direct lending from the government.
Obama has claimed that the change would save at least $48 billion over the next 10 years - money that could be funneled to student aid. But Republicans are concerned about the costs of that and even some Democratic lawmakers oppose the switch.
Higher education groups are divided. They welcome more money for student aid, but about two-thirds of colleges use the subsidized lending program and some want to keep the program.
Lenders are also fiercely lobbying against the proposal, which would end a historically lucrative business.
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