Direct loans--student loans lent directly by the federal government--are more efficient and 12 times cheaper for taxpayers than the loans that Sallie Mae earns billions on. The banks' profits basically = federal subsidies. The government's own numbers, in a report released September 29, say so. And Congress is keeping that report secret until October 28--2 days after the HEA goes back to the House committee, quite possibly for more cuts to student loans. The whole story, plus an alert to write your Congressperson, is at Student Loan Watch.
Why wouldn't Congress want an estimated $17 to $60 billion in free money to apply toward more student aid? The same $reason$ Congress tends to pass laws that favor other highly profitable corporations. See this Chronicle of Higher Education investigation for details:
.... over the last year and a half, officials with the loan industry and proprietary institutions [for-profit colleges] have given, individually and through political-action committees, or PAC's, almost $1 million in campaign contributions to the 49 members of the House Committee on Education and the Workforce, according to Federal Election Commission records through the end of May. More than half of the money, about $540,000, has gone to the two Republican lawmakers in charge of drafting the higher-education legislation -- Reps. John A. Boehner of Ohio, who heads the full committee, and Howard P. (Buck) McKeon, who leads the panel's subcommittee on higher education.
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Sorry, I know everyone hates federal bureaucracy, but the government's own numbers say direct loans are cheaper. That's why the bill last year to support more use of direct loans had bipartisan support. Bureaucracy can sometimes be more efficient than fat corporate subsidies.
Here's the Congressional Budget Office estimate from last year:
http://www.nasfaa.org/PDFs/2005/STARCBOscore.pdf
That "independent" study was sponsored by three student loan groups. It brought in all kinds of external factors--like the taxes paid by banks--to skew the numbers.
http://www.uwire.com/content//topnews030805001.html
If student loan companies are so efficient, let them go out on their own and make their profits without federal guarantees. The government can save the money they use to subsidize them and give it out as need-based aid.
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