Obama's Education Agenda

Obama is facing yet another ferocious fight in Congress in the coming weeks, this time over his education agenda. The main point of contention is his plan to replace subsidized student loans made by banks with direct government lending. The private student lending industry is of course up in arms about this because for years they have been imposing hefty fees on student loans that are subsidized by the government anyway. They have used these fees to enrich themselves while students are left in a limbo of uncertainty on whether or not they could qualify, how much interest and fees they have to repay, etc. Last week, Sallie Mae, one of the industry's giants, reported that despite losing $213 million in 2008, it paid its CEO more than $4.6 million in cash and stock options and its vice chairman more than $13.2 million, including the use of a company plan. While they did not take any bailout money, the private lending industry would have collapsed as a whole if it were not for government help. So what does Obama want to do?

Since the government already guarantees repayment of these loans up to 97% these loans have been risk-free for banks. Obama wants to replace these loans with direct government lending and redirect the profits to pay for Pell Grants, which are invaluable to struggling students. The direct lending program is already being used by over 1,500 schools nationwide. According to the Congressional Budget Office, the plan would save $94 billion over the next decade and this would be the money the government would have to spend on Pell Grants which would increase every year to keep up with inflation thereby removing considerable amount of uncertainty in students' lives over whether or not Pell Grents would be available. Some powerful Congressional Democrats are up in arms because they would no longer have any control over the lending industry and would have to spend money on Pell Grants while the private lending industry and their lobbyists argue that this would leave private industry employees unemployed.

The government could absorb some of the employees from the private lending industry putting them in charge of loan processing, etc, but there is absolutely no reason this shouldn't be done. It is about time the government would start putting students ahead of banks' profits. And that's exactly what Obama will do. And no one can argue otherwise. This is why he should come out in front of the American people and dare these lobbyists and Congressional opponents to publicly oppose the plan.