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Obama plans to make college more affordable
Kaushal Toprani
Issue date: 5/18/07 Section: News
U.S. Senator and presidential candidate Barack Obama outlined his plan to reform the college loan system and make college more affordable May 15 in a conference call with reporters from numerous collegiate papers.
"The problem has gotten worse, tuition and fees to private college and universities have gone up 11 percent in the past five years, nearly six percent in the last year alone," Obama said.
According to the Democratic senator from Illinois, 200,000 students who were qualified to attend college were priced out because they could not afford the cost of higher education.
Obama plans on addressing the problem by eliminating student loans from private banks. Currently, students can either borrow directly from the federal government, or obtain a loan from a private bank. The federal government ensures profits for the private lenders by subsidizing the loans.
"These private lenders are costing American tax payers $15 million every day, and they provide no additional value to anyone but the banks themselves … I don't think there's any justification for this, especially not when private lenders are in behavior that is certainly unethical and might even be illegal," Obama said.
The recent investigation by New York Attorney General Andrew Cuomo revealed several universities, including Drexel, have revenue sharing agreements with private lenders in return for a preferred lender status with the educational institution's financial aid department. According to the New York Times, lenders have given financial aid officers "gifts, trips, stocks, and consulting payments."
Drexel University receives $100,000 each year in its revenue-sharing agreement with Education Finance Partners. The University states the money is used for scholarships.
"What's worse is private lenders like Sallie Mae have been working aggressively to persuade schools to pull out of the direct loan program and rely entire on private lenders," Obama said.
Obama believes his plan would have saved $6 billion this year, had it been implemented. The senator plans to use to the savings to make more student loans, increase the dollar amount and number of Pell Grants awarded each year. Obama proposed a similar program in 2004.
"The problem has gotten worse, tuition and fees to private college and universities have gone up 11 percent in the past five years, nearly six percent in the last year alone," Obama said.
According to the Democratic senator from Illinois, 200,000 students who were qualified to attend college were priced out because they could not afford the cost of higher education.
Obama plans on addressing the problem by eliminating student loans from private banks. Currently, students can either borrow directly from the federal government, or obtain a loan from a private bank. The federal government ensures profits for the private lenders by subsidizing the loans.
"These private lenders are costing American tax payers $15 million every day, and they provide no additional value to anyone but the banks themselves … I don't think there's any justification for this, especially not when private lenders are in behavior that is certainly unethical and might even be illegal," Obama said.
The recent investigation by New York Attorney General Andrew Cuomo revealed several universities, including Drexel, have revenue sharing agreements with private lenders in return for a preferred lender status with the educational institution's financial aid department. According to the New York Times, lenders have given financial aid officers "gifts, trips, stocks, and consulting payments."
Drexel University receives $100,000 each year in its revenue-sharing agreement with Education Finance Partners. The University states the money is used for scholarships.
"What's worse is private lenders like Sallie Mae have been working aggressively to persuade schools to pull out of the direct loan program and rely entire on private lenders," Obama said.
Obama believes his plan would have saved $6 billion this year, had it been implemented. The senator plans to use to the savings to make more student loans, increase the dollar amount and number of Pell Grants awarded each year. Obama proposed a similar program in 2004.
Viewing Comments 1 - 4 of 4
Cheryl Smith
posted 5/18/07 @ 8:13 AM EST
Mr. Obama,
In order to prevent the escalating cost of college your solution is to create an enormous federal program that we all know will end up costing the taxpayers much more in the long run. (Continued…)
Andrew White
posted 5/18/07 @ 12:24 PM EST
Shame on Obama for trying to make cheap political points.
What lenders get per day is not as relevant as what it would cost the government to step in and do the job for the lenders, which Obama proposes. (Continued…)
Chris Denny
posted 5/18/07 @ 1:23 PM EST
Just and FYI, there is a misconception in this piece. No fault to the author, its confusing, and even the politicians don't really understand what they are talking about. (Continued…)
Jim
posted 3/07/09 @ 11:53 PM EST
I had a lot of trouble determining whether I was eligible under this plan for a mortgage modification. I finally found an eligibility calculator for this plan which is gonna make it a lot easier to talk to Countrywide knowing what I can get now. (Continued…)
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