Student loan biz not looking too healthy

Mortarboard with price tag

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Kai Ryssdal: The political chatter in Washington this week is mostly about the health care bill. People might want to brush up on student loan rules, too. Marketplace's Nancy Marshall Genzer explains.


NANCY MARSHALL GENZER: Right now, the federal government pays a subsidy to banks that make government-guaranteed student loans. The measure that's hitching a ride on the health care bill would cut out the banks. The Education Department would make the loans directly.

Jack Jennings heads the Center on Education Policy.

JACK JENNINGS: If the middle man is eliminated, there's all sorts of money that's saved in the middle and can be mostly redirected into further grants to students to go on to college.

Democrats say the student loan overhaul would save the government about $68 billion over 10 years. Much of that money would go toward government grants for students. The losers in all this are the banks.

Scott Talbott is a lobbyist for the Financial Services Roundtable, a trade group.

SCOTT TALBOTT: We estimate that about 35,000 student loan professionals would lose their jobs overnight.

Jason Delisle has an answer for that. He's a budget expert at the New America Foundation in Washington.

JASON DELISLE: The guaranteed student loans program is not a jobs program. It's a program to ensure students get low interest loans.

But some schools are ignoring the student loan debate. They're starting to cut out the middleman themselves. Students don't have to get their government loans through the banks. There's already a direct government loan program. The loans aren't cheaper for the students, but they're more convenient. And more schools have started offering them.

Jack Jennings of the Center on Education Policy says schools are trying to maximize whatever help students may get from the government.

JENNINGS: And so they're looking for any way they can to make the system more efficient and provide as much money as they can.

So, out goes the middleman.

In Washington, I'm Nancy Marshall Genzer for Marketplace.

About the author

Nancy Marshall-Genzer is a senior reporter for Marketplace based in Washington, D.C. covering daily news.

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