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."