Friday, September 18, 2009

SEE YA LATER SALLIE MAE

The House voted to eliminate the Federal Family Education Loan Program, saving an estimated $87 billion in subsidies to banks over the next decade.

Some -- not all-- of the money will go to improve higher education access, notably:
  • $40 billion over 10 years to increase the maximum Pell Grant to $5,550 and ensure that it would increase annually by the rise in the Consumer Price Index plus 1 percent.
  • $10 billion to community colleges in support of President Obama's American Graduation Initiative, designed to produce 5 million more two-year college graduates by 2020.

Once the second most profitable company in the entire Fortune 500, Sallie Mae has now been relegated to junk bond status and potential irrelevance. This should be a day of celebration for student advocates everywhere....

but, it must also be disappointing for those currently burdened by student loans, as the bill does nothing to make those burdens more manageable. Student borrowing jumped by 25% last year, defaults and delinquencies are up, tuition is up. 100% Direct lending is a great first step, but it's only the first step.

4 comments:

Anonymous said...

You're completely right --- this is only the first in many steps needed to fix the student loan mess and particularly to fix the damage done to current student loan holders. I feel this will not be a full victory until Congress does something to adjust the loans currently in place and owns up to their guilt. In the meantime, for all future students, hats off to you for not having to be subject to the likes of a creature like Sallie Mae !! You don't know how very lucky you are but trust us, this is something to celebrate !

Simmer1119 said...

I've always wondered if anything would ever be done to help out those of us who have made it through graduation, taking loans along the way. I agree the loans are a means to an end, and my life is pretty good now because of the loans I took. But it seems that all the current assistance and policy change only helps the students going in now. It seems they will come out in 4 or 5 years with less debt than me, and I graduated only a few years ago. I'll carry this burder for at least 25 more years when friends of my little brother won't have that burden.

I am a person of honor and I will end up paying the loans back, but it seems that the government could issue better tax credits to those who are paying loans back. Couldn't we come together on something like a hybrid program where if a person is carrying X in loans and in good standing then they qualify for a home loan at a discounted government program rate? Seems to kill two birds with one stone, homes are purchased (The American Dream) and loans are offset for good repayment and interest rates are blended so that the recent grad is incentivised to buy a home and pay the student loans back.

I think I am a typical example. I may not be. 100k in loans on graduation day, BS, MS, and MBA to show for it. (I was working a full time job for the graduate work but still needed the loans). I pay $450 to student loans each month. I pay $2000+ for a mortgage each month. I'm forced to pay PMI (another $130/mth) on my home loan because I don't have 20% to put down as a down payment on a home...There must be a way to offer a reduction in interest on one of the loans in order to spark home buying and continued repayment of the school loans.

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