Barack Hussein Obama gives student loans the axe

Obama gives student loans the axe
Obama proposes changes to the 2010 budget that would move most lending into the program run by the US Education Department.

WASHINGTON (Reuters) -- The $85-billion U.S. college student loan business reeled Thursday from a proposal in President Barack Obama's 2010 federal budget that would axe the giant federally guaranteed student loan program.

In a major shift that severely undercut shares in top student lender Sallie Mae, Obama's budget outline called for moving most student lending into the direct-loan program run by the U.S. Education Department.

The proposal is subject to review by Congress and possible changes. If adopted, the White House said it would save taxpayers more than $4 billion a year and end "entitlements for financial institutions that lend to students."

The president's plan sets up a clash between congressional Democrats, who praised it, and private-sector student lenders, once a powerful Washington, D.C., lobbying force brought low in recent years by scandal and the financial crisis.

Sallie Mae Chief Executive Al Lord said in a statement that the Virginia-based company would "continue to work with the administration and Congress."

Shares in Sallie Mae, known formally as SLM Corp, were down 37% at $5.30 in afternoon trading on the New York Stock Exchange, while Student Loan Corp, a major lender tied to Citigroup, was down 24% at $40.22.

Stocks of for-profit education providers were also down. ITT Education was off 8% at $108.03, DeVry Inc was off 5% at $50.77, while Apollo Group was down nearly 2% at $74.43.

Obama's budget proposal for fiscal 2010, which begins on Oct. 1, forecasts a huge deficit of $1.75 trillion and sets ambitious goals for reforming healthcare, stabilizing the economy and raising taxes on the wealthy.

The student loan proposal does not set a clear timetable for phasing out the Federal Family Education Loan Program, or FFELP, the foundation of student lending for decades.

"Investors may have to await release of a more comprehensive budget document in late March or early April for more detail," said Charles Gabriel, a managing director at Washington-based consultants Capital Alpha Partners.

But the proposal brings to a head years of criticism that the FFELP is too expensive, provides lenders with excessive subsidies, and ties higher education funding too closely to the unpredictable ups and downs of Wall Street.

FFELP lenders have replied that for years they have provided affordable loans to millions of students and offered them other services unavailable elsewhere.

"Even though the budget plan does not necessarily spell (the) beginning of the end for the federal student loan programs, it does portend a tough, potentially uphill struggle for the industry and FFELP community," Gabriel said.

Student lenders will be hard-pressed to push back against the proposal with alternatives if the Congressional Budget Office backs the multiyear budget savings the administration claims could be achieved by killing the FFELP, he said.

California Democratic Rep. George Miller, chairman of the House education committee, praised the president's proposal, calling it "a solid plan to make federal student loans more reliable, while saving taxpayers billions of dollars."

Besides Sallie Mae and Citigroup, (C, Fortune 500) other big student lenders have been JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).

Some lenders have pulled back from student loans, where profits have thinned due to cuts in federal lender subsidies, while a deep credit crunch has resulted in massive taxpayer bailouts for major banks. The government began intervening in the student loan market last year to ensure availability of financing for college students.
http://money.cnn.com/2009/02/26/news/economy/obama_loans.reut/index.htm

Doesn't sound like a bad deal to me. The headline is sort of misleading.

thomasjay wrote:Doesn't sound like a bad deal to me. The headline is sort of misleading.

How is it a good thing to end "entitlements for financial institutions that lend to students." ?, good to taxpayers , but not by much, bad for middle class american kids who don't have the $$$ to go to college.

Frankg wrote:

thomasjay wrote:Doesn't sound like a bad deal to me. The headline is sort of misleading.

How is it a good thing to end "entitlements for financial institutions that lend to students." ?, good to taxpayers , but not by much, bad for middle class american kids who don't have the $$$ to go to college.

Fair point.

Good point.

Students here in Scotland get a better deal.

Better than down in England, as it happens, as well.

Cartoon Head wrote:

Frankg wrote:

thomasjay wrote:Doesn't sound like a bad deal to me. The headline is sort of misleading.

How is it a good thing to end "entitlements for financial institutions that lend to students." ?, good to taxpayers , but not by much, bad for middle class american kids who don't have the $$$ to go to college.

Fair point.

Good point.

Students here in Scotland get a better deal.

Better than down in England, as it happens, as well.

But they get the bonus of not living in Scotland

Sir Bonvolio wrote:

Cartoon Head wrote:

Frankg wrote:

thomasjay wrote:Doesn't sound like a bad deal to me. The headline is sort of misleading.

How is it a good thing to end "entitlements for financial institutions that lend to students." ?, good to taxpayers , but not by much, bad for middle class american kids who don't have the $$$ to go to college.

Fair point.

Good point.

Students here in Scotland get a better deal.

Better than down in England, as it happens, as well.

But they get the bonus of not living in Scotland

How many fingers am I holding up?

Cartoon Head wrote:

Sir Bonvolio wrote:

Cartoon Head wrote:

Frankg wrote:

thomasjay wrote:Doesn't sound like a bad deal to me. The headline is sort of misleading.

How is it a good thing to end "entitlements for financial institutions that lend to students." ?, good to taxpayers , but not by much, bad for middle class american kids who don't have the $$$ to go to college.

Fair point.

Good point.

Students here in Scotland get a better deal.

Better than down in England, as it happens, as well.

But they get the bonus of not living in Scotland

How many fingers am I holding up?

Looks like one big one as you never take yer mittens off in the cold!

ooo, I'm a naughty bairn!

Frankg wrote:

thomasjay wrote:Doesn't sound like a bad deal to me. The headline is sort of misleading.

How is it a good thing to end "entitlements for financial institutions that lend to students." ?, good to taxpayers , but not by much, bad for middle class american kids who don't have the $$$ to go to college.

Frank,do you even read the articles you post, or is your reading comprehension really this bad? Seriously Frank, they have those Evelyn Woodward reading courses, maybe you should look into one . The article says it's ending entitlements to the financial institutions that have been making student loans, not the student loans themselves. The loans are being shifted over to direct lending from the Department of Education. There's been alot of scandals with some of these private institutions lending practices

thomasjay wrote:

Frankg wrote:

thomasjay wrote:Doesn't sound like a bad deal to me. The headline is sort of misleading.

How is it a good thing to end "entitlements for financial institutions that lend to students." ?, good to taxpayers , but not by much, bad for middle class american kids who don't have the $$$ to go to college.

Do you even read the articles you post, or is your reading comprehension really this bad? Seriously Frank, they have those Evelyn Woodward reading courses, maybe you should look into one. The article says it's ending entitlements to the financial institutions that have been making student loans, not the student loans themselves. The loans are being shifted over to direct lending from the Department of Education. There's been alot of scandals with some of these private institutions lending practices

They are planning to adopt something like how the UK deal with student loans, via the department of education, rather than private loan companies, yes?

They are planning to adopt something like how the UK deal with student loans, via the department of education, rather than private loan companies, yes?

I think that's the gist of it.

ROFL!!

Frankie was a little bit ahead of himself I guess.