President Barack Obama says the federal government is losing money by paying banks to offer loans to students, and wants to cut what he called “intermediaries” that cost taxpayers billions, and use the savings to expand other programs financial aid.
“It turns out that right now a lot of the student loan programs are still run through financial institutions and banks. So I have this intermediary and receive billions of dollars a year managing loans that are guaranteed by the federal government, “Obama said at an event in New Hampshire on Tuesday. Obama said the brokers “are essentially not take risks, yet still being extracted these huge profits.”

The fact why Obama court grants student loans saves taxpayers billions?

- The Obama administration says it can provide student loans much cheaper by eliminating loan subsidies and loans directly to students through the Department of Education. 2011: The government budget projects savings of $ 43 million in 10 years to get rid of private subsidized loans, known as the Federal Family Education Loan Program, or “guaranteed” student loan program that provided more than $ 74 million to nearly 15 million students in 2009, according to the Department of Education.
- The program pays banks the difference between the interests paid on the principal and students pay their fees, currently capped at 6.8 percent.
- The Obama administration says the money would be saved by ending the program would be used for other things. Obama has proposed using that money to lend directly to students in the Department of Education to offer some relief from loan payments for graduates, expand Pell Grants and improve community colleges.
- Erin Dillon, senior policy analyst in Washington think tank Education Sector, the government source said, “basically, can borrow at a much lower cost” than private companies. And since the financial crisis of 2008, the feds have bought large amounts of loans from private lenders who are fighting the expansion of government involvement in the market. Dillon said he supported the president’s proposal.
- The government tried to do the same in 2009 and a bill to enact the plan is pending before the Senate. During the debate in the House of Representatives, where it passed in September, Republicans criticized as acquisition of a “government” of the student loan industry.
- The estimate is more conservative administration that the post in September by the Congressional Budget Office. The CBO report put the savings of the House bill passed in at $ 80 billion, after taking a $ 7 billion to the Ministry of Education to manage student loans itself. Backed by an industry alternative that leaves private companies serving loans issued by the government would save 67 billion U.S. dollars, $ 13 billion less than the original bill, the CBO said.
- The Department of Education attributed the discrepancy between their projections and CBOs to different assumptions about future interest rates.

Conclusion: Estimates published by the administration in Congress and suggest that subsidies to lending would save billions of dollars a year – but the Obama administration has plans for the money saved on a budget education which is expected to grow by 6 percent in 2011.

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