Student Loans Will Fund Health Care Reform

 The recent passage of health care overhaul legislation makes the federal government the primary piggy-bank of student loans for prospective students, erasing the subsidies paid by the federal government to private student loan providers who previously had been involved in the lending process.

According to Sen. Lamar Alexander, (R-TN) the real purpose of the Obama administration’s plan is to “overcharge 19 million students on their student loans, to help pay for the Democrats’ health care bill.

http://www.heartland.org/healthpolicy-news.org/article/27528/Senator_Says_Feds_Student_Loan_Takeover_Will_Fund_Obamacare.html

Under the current FFEL system, banks make loans to students. While the student is in school, the federal gov pays the interest on those loans. After graduation, the lender collects on the loans. If the loans are in default, the gov picks up the tab. This is great for bankers but bad for the taxpayer.

Under the new system, all new federal student packages will originate through the Direct Student Loan program, moving the loans out of the FFEL program. The Committee on Education and Labor estimates the new program will enable 500,000 students to keep their Pell grants, avoiding the 60 percent cut that was previously expected. However, proponents of the legislation say this is a way to nationalize the student loan industry and to fund health-care reform.


Sen. Alexander said, “This is how it will work: The federal government will borrow money at 2.8 percent and then lend it to students at 6.8 percent—spending the difference on health care and new government programs. In Tennessee, 200,000 students have student loans, so what this latest takeover means is that those Tennessee students will, on average, pay $1,700-1,800 more in interest over 10 years—to pay for the Democrats’ health care bill.

Financial experts who oppose the new bill say the federal gov, instead of lowering costs for students, will use the revenue to fund other gov programs. According to the preliminary CBO estimate produced this morning, the new bill will take $9.1 billion over 10 years from students’ interest payments to fund recently passed health care legislation.