House Backs Big Changes in Student Aid Programs

New York Times: By DIANA JEAN SCHEMO

WASHINGTON, July 11 — The House approved far-reaching changes in student aid programs today, voting to slash $19 billion in federal subsidies to student lenders, and use the savings to raise aid for needy students and cut in half the interest rates on federally backed loans.

The measure was approved 273 to 149, in a sometimes raucous debate, with 47 Republicans joining Democrats to assure its passage.

Democrats who took control of Congress this year had campaigned on promises to help the middle class with the escalating costs of higher education. The legislations signals a sea change for the student loan industry, which had largely enjoyed unflagging support under the Republican majority of the past decade.

Obama outlines student loan overhaul

Yale Daily News - Obama outlines student loan overhaul:

Several presidential candidates in recent weeks have suggested that they would change the structure of the federal financial aid system, either in an attempt to make college more affordable or to reduce government involvement in the aid system. But Obama, in a conference call with college reporters this week, made his position on the question of federal financial aid the loudest of all his competitors. He vowed to overhaul the aid system in order to curb corruption by eliminating the middleman between the federal government and students seeking loans.

“One way we can make college more affordable — because a lot of young people have been asking me about this on the campaign trail — is by reforming a wasteful system of student loans that benefits private banks at the cost of taxpayers,” Obama said. “Private lenders are costing America’s taxpayers more than 15 million dollars every day and provide no additional value except to the banks themselves. I think the system needs to be fixed.”

Conflicting interests within Universities

From The New York Times:

With Congressional hearings on the student loan scandal scheduled for next week, lawmakers are looking around for ways to root out the kinds of corruption uncovered in recent investigations by New York’s attorney general, Andrew Cuomo. A good start would be to pass the Student Loan Sunshine Act, an important bill that was introduced months ago.

The Sunshine Act would make it a federal crime for lenders to offer college officials anything of value in exchange for the right to do business at a given school. The new law would require the colleges to explain publicly why they had placed a given lender on the school’s “preferred lender” list and would force the institutions to disclose any special deals that had been made behind the scenes.