Private Lender Involvement for Students Loans to End

A hat tip to Wall Street Journal writers Corey Boles and Robert Tomsho for their news coverage on my favorite topic: education in the United States. As you know, my website http://www.roccobasile.net/ covers education and charity.

So just out of Washington today, the House of Representatives approved legislation that would end private-lender involvement in the student-loan market. This establishes the federal government as the sole provider of college loans, and means there will be much change within the federal government's higher-education policies.

What this basically means is that all lenders would be cut out of the market for originating loans, although there would still be a role for private banks and lenders to bid for a limited number of contracts to service the loans after they are made by the government.

What is known as the Federal Family Education Loan Program - this is when the government guarantees loans made by private lenders - remains the single largest source of college loans. Loan volume totalled $74 billion, up 13% from a year earlier.

Obama's administration has said they will use the anticipated savings from this measure to increase grants for low-income students, and also boost funding for minority student groups. This would mean they culd also provide money for school construction. All in all this could save taxpayers $87 billion over the next ten years.