Pending Legislation Will Overhaul learner Loans

Student Loans Bills - Pending Legislation Will Overhaul learner Loans

With a 253 to 171 vote last week, the Democratic-led House of Representatives de facto passed landmark legislation that would bring an end to the Federal family schooling Loan program (Ffelp), the program initiated by the Higher schooling Act of 1965 to offer college students federally guaranteed learner loans via secret lenders.

Student Loans Bills

Currently, the government pays these secret Ffelp lenders a subsidy for the federal learner loans they originate. A second federal learner loan program - the Federal Direct learner Loan Program, begun in 1992 - issues federal learner loans directly to borrowers through the U.S. Division of Education, with no third-party involvement from a bank or other Ffelp lender.

Should the House bill pass the Senate and become law, the Ffel program will be dismantled and all federal learner loans will become Federal Direct loans, made directly through the federal government rather than through third-party Ffelp lenders and banks.

Expanding Pell Grants, Ending Government Subsidies to Banks

Supporters of this legislation, known as the learner Aid and Fiscal responsibility Act of 2009 (H.R. 3221), say that the elimination of Ffelp subsidies will generate  billion in savings to taxpayers over the next decade.

President Obama has been a vocal backer of the bill, maintaining that Ffelp subsidies funnel government money to banks and away from students.

"Ending this unwarranted subsidy for big banks is a no-brainer for folks everywhere," Obama said on Monday in a speech at Hudson Valley society College in New York.

The author of the bill, Representative George Miller of California, echoed this sentiment. With its vote to pass the measure and make the government the direct issuer of all federal learner loans, said the Democrat and chairman of the House schooling and Labor Committee, "the House made a clear selection to stop funneling vital taxpayer dollars through boardrooms and start sending them directly to dorm rooms."

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