First, a quick overview of what a student loan is.
These are loans to students who pursue higher education (in a college or a universsity).
The most popular loan, the Stafford Loan, has two versions, subsidized and unsubsidized.
Here is the unsubsidized version:
A loan interest rate is the percentage of the total loan amount. The higher the interest rate, the more it matters. The higher the interest rate the more you pay in the long run over and above the real amount you first borrowed. For example, when you take out a loan for $20,000 with a loan repayment term of 10 years, the truth is you will ultimately pay well over $20,000. How much more? Completely depends on the loan interest rate. It could be a few thousand dollars. When boiled down an interest rate is the price you pay for borrowing money from a lender.
The subsidized version is the same thing, with one addition:
If you qualify for a subsidized Stafford Loan the federal government pays the interest on the loan:
* While you are in school.
* If you enter a period of loan deferment.
* During the six-month grace period that immediately follows graduation.
You take over loan repayment, of the principal and interest, after the initial 6 month grace period ends.
Our tax money pays banks the interest on the student loans while the students are in college, studying, and up to six months after a student graduates.
This is a sweeeeeeeeeeet deal for banks.
Obama and co., in one of the very few good moves he and his team of happy pretend liberals did, do the right thing.
Education Secretary Arne Duncan on Tuesday urged the Senate to overhaul student lending
"Working Americans pay while bankers get rich," Duncan said in a prepared statement. "Sallie Mae executives have paid themselves hundreds of millions of dollars in the last decade while teachers, nurses, and scientists -- the backbone of the new economy -- face crushing debt because of runaway college tuition costs."
Duncan's unusually pointed critique marked an escalation in the student loan debate as the Obama administration seeks to end a program that uses private lenders as middlemen for federally backed loans.
In September, the Democratic-led House passed a bill, over strong industry and Republican opposition, that would mandate a switch to direct government lending. It would steer an estimated $80 billion in savings over the next decade to grants for needy students and other education initiatives.
The government basically said fuck it, why pay bankers to give loans to students and they reap the benefits - lets cut the parasites - errr, sorry, middlemen - out, and use the government to lend to the students directly.
After all, the bureaucracy to process the Stafford loans is already in place; lets use it.
Of course, this is socialism! (as if paying interest directly to banks is not) cry the industry shills, lobbyists and retarded libertarians.
NYTimes, Lobbying Imperils Overhaul of Student Loans:
an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.
After all, this is free money to the banks.
Our tax money, directly into the banks pockets.
And the useless parasites - err, middlemen - do not want to lose their suction cups on our tax money capillary.
In this case, I am with our fine Indonesian president (hee hee).
Fuck the parasites.