I came across this article in the Credit Union Times today: "Bill Has No Impact on Private Student Loans, Jeffrey Says." Here is a quick summary of the article:
Remember that the bill that passed the House also calls for a $5 billion expansion of the Perkins Loan program which will reduce demand for private loans as more student borrowers opt for the 5% fixed interest rate of a Perkins loan vs. the variable rate private student loan with an average starting interest rate between 9.5% and 10.0%. Meanwhile, Credit Union Student Choice, which has originated over $100 million in loans during this peak lending season has had average variable rate of about 6.0%.
Perhaps "no impact" is a slight exaggeration - nothing is free of impact entirely. However, I definitely think that the howls of outrage at a "government takeover of the student loan industry" are disingenuous at best.
Editorials and even reporting pieces in places like the Wall Street Journal have claimed that the federal government will become the "sole source of student loans." This is, frankly, a lie. The federal government will become the sole source of federally-guaranteed loans, while private enterprise will still be able to make non-federally-guaranteed loans.
There's a parallel with people fearing that government will take over medicare: Stafford loans are ALREADY a government program, and eliminating the extra private-sector step in the Stafford process just simply isn't the earth-shattering takeover the banks say it is.
Posted by: Aaron | September 22, 2009 at 06:46 AM