President Obama is working to help students.’
Within his massive economic stimulus package, he has proposed elimination of the Family Education Loan Program (FELP).’
‘For nearly two decades, the government has run two parallel student loan programs, one based on subsidies to private lenders and another as a direct government lending program,’ Sam Dillon of The New York Times reported on Feb. 26.’
One aspect of the latter is the aforementioned FELP. At its base, FELP allows private lenders to make a fortune off students who are intent on getting a degree at a local institute of higher learning.’
It is virtually impossible not to turn a profit when dealing with private loans through private lenders. The government subsidizes private lenders so they are able to lend at will. This means if a student defaults on his loans, the government comes in to hand the lender a large check to cover the majority of the cost the defaulters, giving incentives to lenders. This sounds familiar – subprime loan mess, anyone?’
As students, we cannot help but agree with the way Obama is approaching the issue of student finance and how it is being included in the stimulus plan. If he is going to put our generation in debt for the next few decades, we might as well get something out of it.
To anyone who holds stock in Sallie Mae or any other financial services entities which make a large portion of their profit off student loans, get out now. If FELP is eliminated, these companies will be trading at a fraction of their current value. Given the state of the market, that is pretty low.
The only worrisome thing about this proposition is that these companies make exorbitant profits by virtue of capitalism. In a sense, if Obama follows through with this proposal, government will punish capitalism. This would set an unbelievably unsettling precedent for future government intervention with anyone the government feels may be making too much profit.
As students, we want to see this happen, but in reality we will likely never benefit from it. As capitalists, we may hope this proposal gets shot down fast.’
If we have to be punished for capitalism, then let the benefits be worthwhile.’ Paying for a neighbor’s unaffordable mortgage is fine, but let’s increase those student loans a little more.’ ‘
