They’re telling you lies about the new student loan law
- April 1, 2010
- 2 comments
- Posted in College, Latest Posts
I’m hearing so many lies about the change in the government’s education loan programs that I have to set the record straight. Anyone who cares about cutting government spending and helping students and their parents should love the change. But the truth of the program is being hijacked by the people who scream no. Here’s what’s happening:
For years, students have gotten their government education loans in one of two ways: (1) Through banks and student-loan companies such as Sallie Mae. The government pays them a fat subsidy for their trouble. (2) From the Direct Loan program, which cuts out the banks. Instead, the loans are distributed through college financial aid offices. A majority of students are already in the Direct Loan program. After July 1, all government education loans will be handled that way. That includes Stafford loans for undergraduates and PLUS loans for parents and graduate students. The change will save the government an estimated $61 billion over 10 years.
So what are the right-wing fear-mongers making of this? Here’s what I’ve heard.
–They say that the plan taxes college students because the Direct Loan program costs them more. Senators Grassley and Graham claim there’s a student “surcharge.” Wrong. The government’s student loans cost exactly the same, whether distributed directly or through the banks. PLUS loans will actually cost less. When you borrow directly, you’re charged 7.9 percent interest. When you borrow through the banks, you pay 8.5 percent.
–They say that the law prevents students from shopping around for a better price. Wrong again. There’s no better price on Stafford and PLUS loans. You can still shop around for the expensive private loans offered by banks, if the parents can’t get a PLUS loan to cover all the costs. But guess what? The banks won’t let you price-compare. You have to apply and pay the application fee before the bank will tell you what your interest rate will be. So much for “shopping around” in the private sector.
–They say that students are being hit to pay for that dreadful, awful, no-good, very bad health care reform act. Still wrong. None of the savings are earmarked for expanding health care. What’s more, students aren’t being hit for anything. What’s happening is that the banks are losing their government welfare. I am not in tears.
–They say that Obama is taking away jobs, just when the economy needs them most. I’m especially fond of this complaint. These are the people who say that government spending can never create jobs, yet cutting government spending can apparently take them away. No matter. Some jobs might indeed be lost, but others will be created. The goverment is going to hire the banks and Sallie Mae to service all the loans.
Also for the record, here’s where that $61 billion in savings will go: $10 billion toward reducing the federal deficit. $36 billion toward raising Pell grants for poor and lower-middle-income families (although the increase is very small). The rest, toward wiping out the current spending deficit in the student loan program. Zero toward paying for health care.
I can understand why people who believe this stuff would hate the student-loan reform. If I believed it, I’d object to the program, too. But they’re not getting the straight story. What they’re hearing is genuine, gold-plated, bona fide bunk.
Tags: PLUS loans, Stafford loans, student loans
Thanks Jane, I’m a conservative but things are so absurdly partisan these days I’m discovering more and more that I can’t trust conservatives politicians to tell me the truth because they’re more interested in getting elected and wresting power from the Dems.
I mourn for the reasonable middle. People willing to compromise for the country’s good. Why are we sending zealots to Congress instead of true politicians who understand that pulling different interests together is their job. It’s an honorable job, much missing these days. Thanks for your comment.