Student loan rates cut in half?

Jeremy Hobson Sep 8, 2007

Scott Jagow: Congress could have a final vote today on a big student financial aid bill. It would allot more money for Pell grants and cut subsidies to lenders. The bill’s supporters call it the biggest investment in college aid since the GI bill in 1944. Lenders, they’re not so happy about it. Jeremy Hobson reports.

Jeremy Hobson: Democratic Congressman George Miller, who chairs the House Education and Labor Committee, declared victory in what he called the battle over this bill.

George Miller: This was about whether or not we were going to serve the special interests, who were feeding off excessive subsidies from the federal government or whether we were going to serve students who were pursuing a college education.

The president has promised to sign the legislation. That means Pell grants will jump by about $1,400 by 2012 and interest rates on federally-backed student loans will be cut in half.

And where’s this money going to come from? Lender profits.

Kevin Bruns: This bill punishes the industry.

Kevin Bruns with America’s Student Loan Providers says borrowers will feel the pain when lenders get out of the business of offering federally-backed student loans.

One big lender, Nelnet, announced 400 layoffs yesterday. It says the move was in response to the legislation.

In Washington, I’m Jeremy Hobson for Marketplace.

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