Why is Student Loan Overhaul in Health Care Bill?

[Dr.Traveler]

They rolled the student loan into the health takeover because:

1. It favorably skewed the h/c numbers.
2. They didn't have the votes in the senate for the student loan bill alone.
3. Reconciliation can only be used in a limited fashion and since they were using it to pass h/c they bundled the student loans in with it. ( I wonder what else was bundled in there.)

^^^^ That sums it up well. The actual figures in the hcb don't add up, so they took out the 'doc fix' (which they will do but do it separately), and put in the student loan bill to 'fix the figures'.

Personally, I'm surprised that more people are not concerned with this but it appears that government take over of anything is fine.

I think part of the "lack" of notice of this is due to the fact that the role of private banks in the Student Loan process isn't well understood in the first place. You qualifiy for most student loans through the FAFSA instead of applying to an individual bank, once you have a student loan it tends to end up at Wells Fargo or Sallie Mae, and so much of the interest and repayment terms are controlled by Federal Law anyways.

The only time it mattered who was servicing my student loans was when I went for a consolidation loan on the debt, or when I went for a privately funded student loan.

Regardless, I'm glad mine are paid off. Who knows what this mess would have involved in terms of paperwork.

 

[LibocalypseNow]

Just more Democrat Dirty Tricks. You're right to be confused on this one. This is by far the dirtiest U.S. Congress in History. They gotta go. Make 2010 count.

 

[LibocalypseNow]

Vote the Socialist Bums out!! Your voice can be heard.

 

[Zoom-boing]

My bad...does anyone with a brain, who is not a partisan hack and who does not hate everything the Obama administration does, know why this is in the bill?

To cut out the banks, "the middle man". In doing this they also took away people's choices.

What choices did they take away Zoom-boing?

Which bank, which terms I want. When we applied for the student loan there were many banks to choose from. Now whatever uncle decides the rate/terms is what it will be. Unless they are offering many options, like the banks. I don't know that they are though . . . .

 

[RodISHI]

To cut out the banks, "the middle man". In doing this they also took away people's choices.

What choices did they take away Zoom-boing?

Which bank, which terms I want. When we applied for the student loan there were many banks to choose from. Now whatever uncle decides the rate/terms is what it will be. Unless they are offering many options, like the banks. I don't know that they are though . . . .

The banks can still make student loan or are you saying that they cannot?

Privatizing government backed loans was never a good idea, ever. OIG reports show irregularities in the docs these banks have submitted for payments yet they most generally do not prosecute these irregular request. I know that from seeing the reports with my own eyes. I studied these OIG reports for months trying to assess what all that Well Fargo did that was illegal and irregular on my guaranteed loan so I'm not just talking out my ass on this subject or going by what someone else has led me to believe. This needed to be done years ago.

People that buy these student loans investments will need to find something else to invest in.

Students that have previously been ripped off by banks and universities alike from the student loan programs will be cheering as they hear this news. I read thousands of their stories also.

This type of thing has been happening throughout.
Ripoff Report: University Of Phoenix (UoP) CONSUMER BEWARE!!! They lied, the cheated and now have caused credit issues. Phoenix Arizona

Here is just a few of the ones that have complained online.
Ripoff Report Search Results: student loan

I do not agree with this person in the article claiming it was all Republicans as the ripoffs went on long before Bush.

The student loan rip-off - Education - Salon.com
WASHINGTON -- Secretary of Education Margaret Spellings sounded like a reformer when she testified on Capitol Hill earlier this month over recent revelations of waste, fraud and bribery in the $85 billion-a-year student loan industry.

"Federal student aid is crying out for reform," said Spellings, speaking before the House Committee on Education and Labor. "The system is redundant, it's Byzantine, and it's broken."

But education experts weren't buying it -- and neither were Democrats. Spellings glossed over the fact that the Department of Education, which she took over in 2005, had known since the start of the Bush administration about questionable financial practices and had only recently asked lenders to stop them. The committee's new Democratic chairman, California Rep. George Miller, whose attempt to stop the flow of cash had been thwarted while Republicans controlled Congress, rebuked Spellings for her inaction. Either she or her predecessor, Miller said, "could have stopped this hemorrhaging of money that [lenders] were not entitled to." For six years, there had been what one House staffer called a "Wild West atmosphere of no enforcement at the department," and it had cost taxpayers hundreds of millions of dollars.

From a 2001 internal Education Department memo warning the incoming Bush administration that lenders might be trying to improperly influence college financial aid offices, to a department whistle-blower, to numerous reports outlining a virtual hemorrhaging of the department's money, for nearly six years there have been signs pointing to something rotten in the state of the student loan industry. But time and time again, according to congressional staffers and Washington education experts, the department leadership and key members of Congress looked the other way. continued at link

Worth reading the whole articles.

The Dirty Secrets of the Privatized Student Loan Industry
As reported earlier, 921 universities were also recently issued stern warnings by the Department of Education after 80 percent of each university's student body were found to be working with the same lender.

But the conflicts don't end there.

Thanks to a law enacted by Congress in 1980, the U.S. government accepts the risk of a privatized loan while the lender is guaranteed to profit. For example, say a student defaults on a loan--it's no biggie for the lender because the government has guaranteed that the lender will get his money.

But here's the rub: that 1980 law has something known as the '9.5 percent rule'. Under this rule, the lender collects 9.5 percent in interest. So, if the lender was charging the student 6 percent interest on the original loan, the lender can bill the government for the additional 3.5 percent. The money paid is known as a subsidy.

In 2001, taxpayers shelled out $209 million in subsidies to these lenders. In 2006, the amount rose to $630 million. If tuition costs continue to rise, and lenders continue to pass the risk that the private system is supposed to be based on, it will be more than $10 million by 2010.

Student loan rip-off

Most unfortunately, the article does not go very much deeper than this. The article suggests that the cure for the problem is that the federal government run the student loan programs directly, and cut out the middle man.

The article fails to ask the basic question of why the federal government is involved in this business at all. If the colleges the students were attending really offered such a valuable proposition to the students, then I'm certain that the colleges themselves would be able to arrange loan based financing.

The article mentioned how the cost of college education has been increasing faster than the rate of inflation, but the issue of why was never addressed. I believe student loans are part of the reason. By making more money available to students, this just gives the colleges the leeway to raise tuition even more.

I know it's very anti-mainstream to question the value of a college education, but I'm going to go ahead and question it anyway. My experience is that the majority of college students are just in it for the piece of paper they get at the end which they think will be a ticket to a "good job." Yet we have so many college students graduating with no job awaiting them at all. And then to add insult to injury, they are burdened with student loan payments of hundreds of dollars per month. This is debt that can never even be discharged in bankruptcy.