Pending Legislation Will Overhaul pupil Loans

Student Loans Bills - Pending Legislation Will Overhaul pupil Loans

With a 253 to 171 vote last week, the Democratic-led House of Representatives beyond doubt passed landmark legislation that would bring an end to the Federal family study Loan program (Ffelp), the program initiated by the Higher study Act of 1965 to offer college students federally guaranteed student loans via inexpressive lenders.

Student Loans Bills

Currently, the government pays these inexpressive Ffelp lenders a subsidy for the federal student loans they originate. A second federal student loan program - the Federal Direct Student Loan Program, begun in 1992 - issues federal student loans directly to borrowers straight through the U.S. Department of Education, with no third-party involvement from a bank or other Ffelp lender.

Should the House bill pass the Senate and come to be law, the Ffel program will be dismantled and all federal student loans will come to be Federal Direct loans, made directly straight through the federal government rather than straight through third-party Ffelp lenders and banks.

Expanding Pell Grants, Ending Government Subsidies to Banks

Supporters of this legislation, known as the Student Aid and Fiscal responsibility Act of 2009 (H.R. 3221), say that the elimination of Ffelp subsidies will originate  billion in savings to taxpayers over the next decade.

President Obama has been a vocal backer of the bill, maintaining that Ffelp subsidies funnel government money to banks and away from students.

"Ending this unwarranted subsidy for big banks is a no-brainer for folks everywhere," Obama said on Monday in a speech at Hudson Valley community College in New York.

The author of the bill, Representative George Miller of California, echoed this sentiment. With its vote to pass the quantum and make the government the direct issuer of all federal student loans, said the Democrat and chairman of the House study and Labor Committee, "the House made a clear choice to stop funneling vital taxpayer dollars straight through boardrooms and start sending them directly to dorm rooms."

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