Borrowing from the Gov't to Pay for School

The U.S. government could be the sole provider of student loans, if legislation backing a proposal by President Obama passes.

The Current Scene

Private lenders provided $56.7 billion in student loans in the last school year, according to The Wall Street Journal, including $24.2 billion in loans from private and government-backed student loan lender Sallie Mae (Stock Quote: SLM).

The Proposal

Proposed legislation would provide students with federal loans, the biggest source of help in paying for college, through the government’s direct lending program next year, instead of through private lenders.

Lenders say they’re actually more efficient and better on the service end than the government, but the Congressional Budget Office believes that the changeover could save about $87 billion over ten years, according to the Journal.

Part of the expected savings, $40 billion, would be used to provide additional funding for Pell grants given to low-income students and boost the president’s a $12 billion plan to improve community colleges.

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