September 17th, 2009
03:38 PM ET
10 years ago

House passes bill nixing private lenders in student loans

WASHINGTON (CNN) - The House of Representatives on Thursday passed a bill that would overhaul the student loan system by ending a government-subsidized program for private lenders to provide college loans.

The House voted 253-171 for the bill that, if also passed by the Senate and signed into law, would effectively end the role of private lenders in making student loans. Instead, the government would become the sole direct lender for student loans.

The non-partisan Congressional Budget Office said the bill would save more than $80 billion over 10 years by halting the subsidies to private

The House bill includes increased spending for Pell Grants for low- and middle-income students, as well as more money for community colleges, early-learning programs, school renovations, and colleges and universities that historically serve minorities.

Supporters hailed the measure as a key component of President Barack Obama's goal to make colleges and universities more accessible for all
Americans, especially those from low- and middle-income families.

"Today we have the chance to make the single largest investment in grant aid and other benefits to help more students graduate with less debt … while also cutting entitlement spending by $10 billion over 10 years," said Rep. George Miller, D-California, in introducing the measure.

Opponents called the bill a government takeover of the student loan system that would result in job cuts by lending institutions and reduced
choices for students seeking loans.

–CNN's Deirdre Walsh contributed to this story.

Filed under: House • President Obama
soundoff (70 Responses)
  1. jaye

    I fully support healthcare for everyone, but, the Baucus Bill is crap.
    Isn't there anyone that can write a healthcare Bill that makes sense and is better for Americans than Baucus and crew?
    Why not just expand Medicare and Medicade to those in need?
    I will not support the Baucus Bill in any way, shape, or form.

    September 17, 2009 03:43 pm at 3:43 pm |
  2. Steph

    YES! I have federal loans, but my husband has loans from a private company (to remain nameless). We have had the worst experience with this company and their unethical practices.

    September 17, 2009 03:43 pm at 3:43 pm |
  3. Laura in KS

    Having benefitted from the Govt direct loans program after getting jerked around by private lenders, I have to say that the govt's interest rates are much lower than anyone else's, plus they are much more willing to work with you to get the best repayment plan that works for you. Most schools and universities are govt funded anyway, so it makes sense for them to be responsible for doling out the loans, too. Of course, it will be said that this, too, is a govt "takeover" of another aspect of our lives. Give it up, people. You can repeat those decade-old slogans as often as you want–intelligent people capable of thinking for themselves will always be there to expose your fear-inducing tactics for the lies they are.

    September 17, 2009 03:45 pm at 3:45 pm |
  4. Anonymous

    Where are the choices? Where is the sense of "freedom of choice" that helped to create our nation????

    September 17, 2009 03:46 pm at 3:46 pm |
  5. GI Joe

    I hope they force them to set an interest rate that is reasonable for these loans that sometimes take 10 or 20 or 30 or more years to pay off.

    I know, and unless YOU are having to pay some of these interest rates being charged, don't even try to understand or speak out on it.

    September 17, 2009 03:48 pm at 3:48 pm |
  6. SLM

    Increased spending by Democrats..............Big surprise there. and just who do you think is paying for all these free handouts.

    September 17, 2009 03:49 pm at 3:49 pm |
  7. David

    I think this is a good idea. Why should the Federal Government give money to private lenders so they can give the money to students? It makes more sence for the government to give the money directly to the students who need it. If private lenders still want to give loan to students let them, but the Federal Government shouldn't pay them to do it.

    September 17, 2009 03:49 pm at 3:49 pm |
  8. nick

    Typical repug opposition. It is a lot less when they to school. I guess that was a century ago. Even with 6% interest, payment is still extremely high!

    September 17, 2009 03:50 pm at 3:50 pm |
  9. Tony

    Don't care who is doing the lending. But it isn't only low and middle income families that need help. Why not help everyone making under $250,000. I am upper middle class and make too much for any grants, which is fine. Even though the loan process makes you fill out a long-winded form EVERY YEAR, knowing that you don't qualify. This year I was told repeatedly by lenders, no money was available due to the financial crisis. I wasn't looking for a handout, but A LOAN. And couldn't get one.

    September 17, 2009 03:50 pm at 3:50 pm |
  10. T22

    So now our tax money is going to be used to give people loans and more importantly to secure those loans and cover the losses. Add this to the growing list of private sector functions taken over by the government.

    The most power hungry administration we've ever seen. Even FDR would be blushing.

    September 17, 2009 03:51 pm at 3:51 pm |
  11. Paula

    Kudos to you President Obama!!!!

    I'm sure all the opposers were more concerned about making money for the private lending institutions than getting Americans educated

    September 17, 2009 03:51 pm at 3:51 pm |
  12. Kevin in Ohio

    Wonderful. More government control. Will it ever end? Do democrats ever think of the jobs that will be lost in private industry? I doubt it...they think only of ways they can control every single aspect of life in this country. November 2010 cannot come fast enough.........

    September 17, 2009 03:51 pm at 3:51 pm |
  13. Steve

    When it comes to education, the Democrats seem to want to increase opportunities for all American students to get a good education. And the Republicans just want to insure that private enterprise can profit from it.

    I am sure this was a party line vote.

    September 17, 2009 03:51 pm at 3:51 pm |
  14. panem et circenses, but CNN won't post

    Here come the liberals who will praise this before thinking it through...

    If the government is the only one passing out loan money, then the government decides who gets it. Kind of like the highway money being tied to conditions set by Congress, student loans can now be tied to conditions set by Congress. If Congress insists a University have a specific ratio of students by race or a specific ratio of programs, the University will have to meet that ratio or Congress can declare them inelligible and students will not be allowed to use loan money there.

    Yet another way to control our choices while advancing their liberal social agenda.

    September 17, 2009 03:52 pm at 3:52 pm |
  15. notfooledbydistractions

    Good. Get the private lenders off the government teet. Less money for the banks, more money for pell grants. Good move.

    September 17, 2009 03:53 pm at 3:53 pm |
  16. Sarah

    Good now those greedy bank CEOs wont be living the high life off of our children via predatory lending!!

    September 17, 2009 03:54 pm at 3:54 pm |
  17. Get Off and Push

    Good legislation and the CBO is on target. Now for the GOP's attempt to shoot it down in the Senate as God knows they're against everything else except philandering/

    September 17, 2009 03:56 pm at 3:56 pm |
  18. Independent in NYC

    Good the greedy bankers have been piling debt on our college students that last for decades when they finish their college years. Its time to role back the profits funded by tax payer dollars.

    Bankers the federal ATM is about to be closed.

    September 17, 2009 03:58 pm at 3:58 pm |
  19. JJ in WNY

    much needed, and long overdue! thanks!!!

    i really hope that all the obama haters out there start taking notice of all the pro-consumer legislation getting done while he's in office... first helping end credit card companies' abusive tactics, and now good things like this.

    CHANGE WE CAN BELIEVE IN!!! don't stop here, guys!!!

    September 17, 2009 03:59 pm at 3:59 pm |
  20. Cleavette

    The 171 members that voted against this bill should be thrown out of office.

    September 17, 2009 03:59 pm at 3:59 pm |
  21. Namaste

    Good. When I was an undergraduate and taking out loans, it was direct from the government. No frills, no nothing. Just go to the student financial aid office, fill out the forms, and get the loan directly from the government. Students of my generation (twelve or so years ago) did not pay, indirectly, for the "privilege" of taking out loans from private lenders.

    Sure, the private banking system will whine and yes, indeed, there will be much gnashing of teeth and rending of garments by those who stand to lose out on all the middleman money. But too bad, so sad. Anyone who needs a loan should go through the government and bypass paying the salary and overhead and advertising costs of the private banks.

    It's pretty simple.

    Good job today, House o' Reps!!

    September 17, 2009 04:00 pm at 4:00 pm |
  22. Deborah Black

    Yeah, the privitization of so many of our government programs and obligations has been a disaster. It has ruined the medical institutions of the military; created mercenaries to torture people and then go guard our embassies. Much more damage we can not take from privitizing every thing and paying tax money to instiutions to be middle men.

    September 17, 2009 04:00 pm at 4:00 pm |
  23. Stu

    More socialism?

    September 17, 2009 04:01 pm at 4:01 pm |
  24. wait a minute

    "Opponents called the bill a government takeover of the student loan system that would result in job cuts by lending institutions and reduced choices for students seeking loans."

    Bank jobs for student loans are not productive jobs. Bank workers are better off looking for more productive jobs rather than being the middleman between the government and students who need help.

    As we lose more jobs overseas, we, like England, are offering service-related jobs. Not all service jobs are bad, but counting the profits made by charging students fees and interests beats the original purpose of helping students. There should be laws against this kind of non-productive profits as part of our GDP.

    Education is the way to create more jobs, and putting banks between needy students and the government is no help.

    September 17, 2009 04:02 pm at 4:02 pm |
  25. J Williams

    Why would there be subsidies to private lenders for them to make loans anyway?

    Can't banks operate on their own merit?

    Banks certainly chastise and browbeat us if we run into financial difficulties!

    September 17, 2009 04:07 pm at 4:07 pm |
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