WASHINGTON (CNN) – President Barack Obama says he wants to eliminate what he calls the "middlemen" in the federal student loan program, but he says those middlemen are banks and lenders and he predicts that he's going to have a fight on his hands.
"You have probably seen how this proposal was greeted by the special interests. The banks and lenders who have reaped a windfall from these subsidizes have mobilized an army of lobbyists to keep things the way they are. They are gearing up for battle," Obama said Friday, adding, "So am I."
Obama discussed reforming the federal student loan program at a White House appearance. His proposals include ending the Federal Family Education Loans program, which involve banks and lenders, and shifting those funds to loans directly to students.
Obama said eliminating that program would end a system where lenders are given billions of dollars "in wasteful subsidies that could be used to make college more affordable for all Americans."
"Under the FFEL program, lenders get a big government subsidy with every loan they make, and these loans are then guaranteed with taxpayer money, which means that if a student defaults a lender can get back almost all of its money from our government," he said.
"There's only one real difference between direct loans and private FFEL loans. It's that, under the FFEL program, taxpayers are paying banks a premium to act as middlemen, a premium that costs the American people billions of dollars each year. "
Eliminating the FFEL program would be "a step that even a conservative estimate predicts will save tens of billions of tax dollars over the next 10 years," Obama said.
Those savings, he said, would help pay for expanding the Pell grant program, which Obama said nearly 30 percent of students rely on to put themselves through college.
In his remarks, Obama referred to "sweeping steps" in helping finance college costs, reforming some programs, expanding and modernizing others and making a $2.5 billion investment in initiatives to boost enrollment and graduation rates.
Obama emphasized the importance of a college education. He said half of the fastest-growing jobs in the United States require at least a bachelor's degree.
"If you don't have a college degree, you're more than twice as likely to be unemployed as someone who does," Obama said.
"It's never been more important to have a quality higher education," he said, noting "the cost of that kind of education has never been higher. Over the past few decades, the cost of tuition at private colleges has more than doubled while costs at public institutions have nearly tripled. Compounding the problem, tuition has grown then times faster than a typical family's income, putting new pressure on families that are already strained and pricing far too much students out of college all together."
He said the trend of "quality higher education" slipping out "of reach for ordinary Americans threatens the dream of opportunity that America promised to all of its citizens and threatens to widen the gap between have and have-nots and threatens to undermine competitiveness because we cannot lead in the 21st century unless we have the best educated most competitive workforce in the world."
Yeah, and after this issue is taken care of...heck, even while he is taking care of this issue, he is going to move on and take care of another....That's what he does!!! He handles the business of the nation! AND I LOVE IT!
HE CAN'T STOP! HE WON'T STOP!
He's getting jiggy with it!
Best President EVER
Go for it Mr. President. Help our kids go to college without the hands of the greedy bankers in it! What can we do to help you?
MORE TAX RELIEF FOR STUDENT LOANS PLEASE. Student loans are the new indentured servitude and the current income cut-off for deducting your interest is WAY too low. You have to take out a mortgage on your life to get through grad school, easily incurring 6 figures of debt, but then there's no relief for all the interest the way there is for a home mortgage. Tell those of us who did it with a straight face that it was worth it even though a 6 figure salary is still only enough with which to live paycheck to paycheck.
What? End the practice of all these fat cat leeches feeding off innocent college students and all in the name of better education? After going after the banks and lending institutions involved in this poor excuse for helping better education for Americans, lets tackle health care and get rid of the BILLIONS AND BILLIONS OF DOLLARS that Americans fork over to middlemen organizations who are in business specifically to make a profit AT THE EXPENSE OF AMERICAN CITIZENS and provide absolutely nothing to the health care of Americans! Most of these HMOs, PPOs etc. don't know the difference between a cold and cancer, let alone enough expertise to advise and persuade doctors what course of health care a patient really needs.
Yet another campaign promise kept.
.....yes, I know the legislation hasn't even hit the floor, but the fact that he just keeps trying to do the right thing is such a breath of fresh air.
Finally, a leader who is willing to tackle one of the most sustained rip-offs in American society. A well coordinated, legalized rip-off that leaves people permanently in debt for wanting a college education.
You have no clue how insidious this problem is until you've actually graduated from college with $80,000 in student loan debt.
God bless you, Mr. President. This is LONG overdue. Student loans should go directly to the student or the school–banks should be out of the process altogether.
pete April 24th, 2009 4:55 pm ET
Oh come on. Cant you pay for it yourself. Give me give me give me. Why not make them go into the military first and earn the darn money.
Hey pete, these are "LOANS" . They are paid back.
Dumb ol Republicans.... don't know the difference between loans and grants.
You guys are just about dumb as dirt, ya know it?
Thank you for a bit of bi-partisanship. You might change my mind about your party if you keep this up.
I don't see how any argument can change the fact that the government guarantees these loans. If that's the case, why should banks be allowed to make a profit without taking any risk. It just doesn't make sense. The government can make the loans directly to the students without the banks taking a cut. The students pay less in interest over the life of the loan as a result – this is a good thing. If it wasn't my tax dollars I wouldn't be so interested in how it is spent. I do not want private financial institutions taking any more profit without risk – they're getting enough of that out of the bailout as it is.
This is "BRILLIANT'. I know that the Lobbyist always have the ears of the Snators. We have to get off our butts and let this Congress people know that if they dont "VOTE' our way we will get them out of office. E nough is enough we are tired of them taking money from lobbyist and not caring about the America peopl who vote them into office. Kudos to you Prez Obama. May God help you in every thing you do. I f America wants to remain the "Super power then the education of Americans must be able to stand on two legs.
hey Mark, B'ham., Al.:
it's not the lawyers that need to be removed fro our medical costs, it's the useless middleman profit-motive INSURANCE COMPANIES!
I hope he includes those that currently have loans! Grad school loans are painful!!!!
I hope that the conservative Repubs and tea party goers who are shouting that Obama is taxing future generations with his budget will sit up and take note that he is attempting to make education affordable for future generations by taking down the fat cats who have been feeding at the public trough of higher education for decades.
The student loan situation, along with the skyrocketing cost of tuition has been a growing travesty over the last twenty years or so. Few can afford a college education without student loans. Many new graduates start out their careers already burdened with a debt the size of a house mortgage. This is a difficult situation at best...particularly for those who go into not-for-profit fields such as law enforcement, teaching, gov't. service, etc. that don't command high salaries. The bitter irony is that while these kids are struggling to do the right thing, we're bailing out incompetent bankers who profit from these loans.
Great News For College Students and There Parents!
Thanks man. That's the best post I've seen in a while.
The student loan program should be a program to help students, not to subsidize banks.