It is now official, The House of Representatives approved legislation Thursday that would effectively end private-lender involvement in the student-loan market, establishing the federal government as the sole provider of student loans.
“The bill introduces sweeping changes to the U.S. higher-education system and serves as the third central plank of President Barack Obama’s domestic agenda. Similar to the continuing efforts at overhauling health care, the changes to the federal government’s higher-education policies would have a serious effect on the bottom line for private-sector players currently serving the marketplace.
The House vote was 253-to-171, largely along party lines.
Under the legislation, all lenders would be cut out of the market for originating loans. 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.
The Federal Family Education Loan Program, wherein the government guarantees loans made by private lenders, remains the single largest source of college loans. Lenders made related loans for students at 4,465 schools for the 2008-09 academic years. Loan volume totalled $74 billion, up 13% from a year earlier…”
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