As the College Guide reported last week, student loan corporations are lobbying hard to prevent direct lending, arguing that the change in student loans will put Americans out of work. Well not that many Americans. According to an article in the Scranton Times-Tribune:
The industry contends that the direct loan program would cost jobs, including at a processing center in Wilkes-Barre operated by Sallie Mae, the largest private student loan company.
But Sallie Mae and three other lenders already have signed contracts with the government to service loans under the direct loan reform. In order to get that contract, Sallie Mae eliminated 2,000 overseas jobs and returned them to the United States. They are servicing jobs. Under the reforms, the servicing part of the industry will grow.
In fact it looks like the student loan industry was already taking steps to eliminate American jobs. At least in Sallie Mae’s case, it looks like direct lending might actually bring more jobs to America.
Private lenders currently make about 75 percent of student loans. Under the House bill, the federal government would essentially eliminate private lenders and school would lend federal education money directly to students.
The more to direct lending is supposed to save save $87 billion over 10 years. This money would be used to enhance Pell grants.