Last fall, the Obama administration, with support of House Democrats, revealed a plan that would overhaul the way student loans were disbursed to college students. Instead of receiving loans from banks and other lenders, students would, under the proposed plan, receive funds directly from the federal government. The plan would save the nation $80 billion in fees, charged by the lenders that service student loans, over 10 years. The savings would then be used to increase Pell Grants to students, help forgive loans for students going into public service, assist community colleges and provide early childhood learning programs and modernize public school facilities.
Facing the possibility of losing a significant source of revenue, banks are pulling out all the stops to make sure the bill never becomes law. Lenders have spent millions of dollars in recent months holding public town-hall meetings and private meetings with legislators to make their case. Using scare tactics, they are telling lawmakers that students may default on their student loans more frequently because the counseling lenders provide would no longer be a part of the loan process. The banks say that, in the long run students and the government would be hurt if the bill was passed.
It’s interesting how these major banks—bailed out to the tune of over $700 billion in 2009—are now, in effect bailing out on the nation’s students. Cutting out these middle man, which the banks are, does not hurt students at all. In fact, getting the money directly will reduce the amount of interest students pay over the life of the loan. Students, and the nation, will benefit as educational programs are expanded, using the savings such a change will bring. This is about money, plain and simple: lenders want to make sure this revenue stream stays alive.
Banks are in business to preserve their bottom line; not necessarily to care about the education of our student’s. As a nation, we must work to make sure their big budget lobbying efforts do not pay off. Call your federal lawmakers and let them know that federal student loans must go directly students. Ask that they cut out the middle man. The banks may have money to spend on lobbying, but we can use our voices to make a difference. You can find contact information for you legislators by visiting http://www.usa.gov/Contact/Elected.shtml.
(Judge Greg Mathis is vice president of RainbowPUSH and a national board member of the Southern Christian Leadership Conference.)