The Obama administration is proposing an overhaul in the way a majority of students finance their college education. This proposal may greatly affect the student loan industry causing them to fight against the proposed plan.

Currently, federal subsidies, known as the Federal Family Education Loan program, are provided to private loan companies. President Obama wants to eliminate these subsidies proposing that all loans given to students will be under the control of the federal government. The administration argues that the revamp would save $94 billion. That savings could be redirected to needy borrowers and give more potential students the opportunity to go to college.

There is opposition to the proposal by some. Lenders are worried about the business they could lose. “The Obama plan would mean that many lenders would lose 100 percent of their business,” said Mark Kantrowitz, an industry analyst and publisher of FinAid.org. “It would be a dramatic shift for the way this industry works.”

Others worry about the inefficiency of the education department. “I don’t see the wisdom in creating a new half-trillion national bank for student loans,” he said. “I know how the bureaucracy at the education department works, and you probably are going to get long lines of dissatisfied customers. Those lines could be very long because there are 12 million students.”

Supporters believe the proposal is the most cost effective, dependable way to provide students with the necessary funding for college. They think that the current system needs to be fixed to provide every student with the opportunity to go to colleges.

Source:
Washington Post

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