Government likely to take over student loans

Health care isn't the only area the federal government is looking to reform. Student loans also are being targeted.


"I'm thinking that since it's part of the health care package, I don't think the public is aware," Augusta State University's financial aid director, Willene Holmes, said Tuesday, noting that she hasn't received calls from students or parents about the new federal government plan, which would replace students' private lender options after July 1. The plan is part of the health care legislation the U.S. House of Representatives passed Sunday.

"All indications are the private lenders as we know them, all of them are going to be out of the (student loan) business," she added.

Holmes said that in the next week she'll notify students that if they applied for a loan for next fall they'll likely be going through the new federal government direct loan program instead of a bank.

The Senate will take up the proposed change next week, and approval is expected because only a simple majority vote is needed, The Associated Press reports.

The measure essentially would end government subsidies to private lenders and use that money instead for the government's own loan program and to provide $36 billion in new spending for Pell grants, which are offered to the neediest students.

"So that's a good thing," Holmes said of the added Pell funds.

Holmes said that those who have received private lender student loans in the past will continue to pay on them but would go through the government in future semesters. In some cases, she said, the federal government has already started purchasing private lender loans, meaning the student would start paying the government instead.

Holmes said it's still too early to tell whether the student loan reform will mean a smoother approval process or provide loans for more students, but she said it's intended to make borrowing more affordable for students.

ASU junior Whitley Price, who works in ASU's financial aid office and has applied for a student loan for the fall, said she thinks the government would be more likely to help students than a bank.

"I personally think it's a good thing," she said.

Holmes said she has just one worry -- whether the government will continue offering the financial seminars and credit-counseling sessions that private lenders have conducted each year for ASU students.

"I'm concerned about that because those seminars really help out students a lot," she said.

America's Student Loan Providers, which represents many of the leading financial organizations that offer student loans, says on its Web site that most seminar services would cease under the government plan.

The group also argues that a federal government takeover would eliminate consumer choice and eliminate thousands of jobs in institutions that now provide student loans.

Got a question?

- Augusta State University students and parents who want more information about the likely federal government takeover of the student loan program can call the university's financial aid office at (706) 737-1431.

- Augusta Technical College officials say they don't offer student loans that would be affected by the change.

- Messages left with Paine College's financial aid office weren't immediately returned Tuesday.



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