The U.S. Department of Education is trying to move from current federal student loan practices to a direct loan system, which president Obama supports, whereby schools will lend directly to students, without the expensive middle man, the banks. Despite the fact that the bill probably will not happen this year Sallie Mae, one of the corporations that makes money on student loans, is lobbying hard on a revised plan for the Senate bill on student loans.
Sallie Mae’s new plan is somewhat more favorable to Sallie Mae than the bill that passed in the House earlier this year. According to the House Committee on Education and Labor, the company’s modified student loan proposal would direct more than $8 billion from actual aid to students and divert the money to the lenders:
The House saw this proposal… and soundly rejected it, instead choosing to pass the Student Aid and Fiscal Responsibility Act, which invests all of its savings in students, families and taxpayers. Americans are sick and tired of CEOs and banks taking them for a ride and are ready for policies that will reduce waste and excess and do what’s best for Main Street – not Wall Street.
Sallie Mae’s Senate proposal is curiously similar to the Student Loan Community Proposal Sallie Mae and other lenders offered the House in the spring. The lenders explained that their proposal:
Endorses all of the core principles of the Administration’s reform effort while maintaining choice, competition and superior service for students and preserving 35,000 local jobs.
The Congressional Budget Office indicated that over ten years the Student Loan Community Proposal would cost $13 billion more than the Democrats’ plan to move all loans to direct lending.