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Kai Ryssdal: Here’s a little trivia to see if all of that college tuition you and your parents paid went to good use. Where does this piece of financial advice come from. Neither a borrower nor a lender be? Ten points to those who answered Shakespeare…Hamlet to be precise. On Capital Hill today, the lenders weren’t looking so good. In the wee hours of the morning, the Senate passed the Higher Education Access Act. It’s a big piece of legislation that would cut about 18 billion dollars in federal subsidies to companies making student loans. Instead…the money’s going to be used to fund grants and student aid. If it’s approved by the President, it’s going to make that whole ‘being a borrower” thing, a lot easier. Jeremy Hobson reports from Washington.
Jeremy Hobson: Senator Edward Kennedy called the passage a victory for students and their families. Big lenders like Nelnet don’t see it that way at all.
Here’s spokesman Eric Solomon:
Eric Solomon: Essentially the legislation is going to force a significant portion of the private sector away from the student loan market.
Lenders say it just wouldn’t be worth it if their profits dwindled to a tenth of a percent on federal loans. Those loans, by the way, make up about a third of all student financial aid.
Kevin Bruns who runs the lenders group America’s Student Loan Providers says borrower benefits like reduced interest rates will be the first thing to go.
Kevin Bruns: You can’t cut $18 billion out of a federal student loan program and not have that passed on to the ultimate consumer. I mean it defies the law of economics.
Barmak Nassirian: Lenders have said that every time an attempt has been made to reduce their profits.
That’s Barmak Nassirian at the American Association of Collegiate Registrars and Admissions Officers. He calls the bill a giant step in the right direction.
The bill would boost Pell Grants from an annual maximum of $4,300 to $5,400.There would also be a cap on how much of a borrower’s income could be used to repay loans. And student debt would be forgiven after about 20 years.
Nassirian: The house bill and the senate bill actually focus back on who the intended beneficiary was supposed to be — namely, students.
After lawmakers hammer out their differences in conference, the bill will head for the President’s desk.
In Washington, I’m Jeremy Hobson for Marketplace.
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