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Direct-Lending Program for Student Loans Proposed; Sallie Mae Shares Drop
Wall Street Journal ^ | 2/26/09 | WSJ

Posted on 02/26/2009 9:21:37 AM PST by cowtowney

Renewing a battle waged during the Clinton administration, President Barack Obama proposed to eliminate private lenders from the student-loan market and have the federal government make all such loans directly.

In his spending blueprint for fiscal 2010, Mr. Obama said the shift to the Department of Education's so-called direct-lending program would save more than $4 billion a year in subsidies paid to private lenders and eliminate uncertainty for students "because of turmoil in the financial markets."

Direct loans only accounted for about 20% of the $68.2 billion in new federal loans during for the 2007-2008 school year, but interest in them has surged recently as many private lenders have stopped making federally guaranteed loans amid the credit crunch.

Student loans themselves don't generate significant earnings for banks because of the high level of defaults, so the fees paid by the government are the main incentive for lenders to take part in the program.

One of the largest players in the student-loan market, SLM Corp., saw its shares fall 26% as word of the proposed change filtered out Thursday morning. SLM was down $2.17 to $6.22 a share in early trading on the New York Stock Exchange.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Breaking News; Business/Economy; Culture/Society; Government
KEYWORDS: 111th; banking; bho2009; bho44; college; educationfunding; obama; obamatruthfile; salliemae; slm; studentloan
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Obama and Bernanke said they were not going to nationalize banks... Here they are taking over college lending. Was it one day or two days since they said that?
1 posted on 02/26/2009 9:21:37 AM PST by cowtowney
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To: cowtowney

How do you know Obama is lying?


2 posted on 02/26/2009 9:22:23 AM PST by cowtowney
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To: cowtowney
How do you know Obama is lying?

His lips are moving.

3 posted on 02/26/2009 9:23:38 AM PST by Jen (The original point and click interface was a Smith & Wesson.)
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To: cowtowney

Yeah...good luck if you’re a conservative college...your students won’t get the time of day from this crowd...


4 posted on 02/26/2009 9:23:43 AM PST by mo
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To: cowtowney

Sallie Mae’s stock is down 42% today


5 posted on 02/26/2009 9:26:01 AM PST by cowtowney
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To: cowtowney

The government taking over a business operation is going to save money?

On what other planet did that happen?


6 posted on 02/26/2009 9:26:09 AM PST by henkster (0bamanomics: "I'll loan you all the money you need to get out of debt.")
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To: cowtowney

Because the price of tuition isn’t high enough yet.


7 posted on 02/26/2009 9:26:48 AM PST by kc8ukw
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To: cowtowney

I hope Sallie Mae falls apart. It’s a corrupt, criminal organization. They routinely lie and tack on fees and charges. It took me 4 months to prevail in a dispute over $500 they were trying to fleece from me.


8 posted on 02/26/2009 9:27:42 AM PST by Unlikely Hero ("Time is a wonderful teacher; unfortunately, it kills all its pupils." --Berlioz)
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To: henkster

9 posted on 02/26/2009 9:27:43 AM PST by Petronski (For the next few years, Gethsemane will not be marginal. We will know that garden. -- Cdl. Stafford)
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To: henkster
Student loans have the highest default rate of all loan types. Private sources are drying up. They use a government backed operation to make these loans, when they aren't paid, they're written off, and no ding on the credit report.

Taxpayer holds the bag.

10 posted on 02/26/2009 9:28:10 AM PST by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: cowtowney

Yep, been waiting for this massive gubment redistribution of income/wealth ponzie scheme. Next is credit card debt. All placed on the back of taxpayers for generations to come.

Elections have consequences. Back in the USS, back in the USS, back in the USSR.


11 posted on 02/26/2009 9:29:52 AM PST by Oldeconomybuyer (The democRATS are near the tipping point.)
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To: cowtowney

How about an investigation into college price gouging brought on as a direct result of easy student loans? (sound of crickets chirping....tumble weed blows down the street)


12 posted on 02/26/2009 9:30:12 AM PST by rhombus
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To: Richard Kimball

And how will the government taking over this program going to make it any better?

At least now there is some responsiveness and efficiency at Sallie Mae. Put the govt directly in charge, the number of people administering the program triples, and kids will be 21 before they get the loan approved for their freshman year.

Of course, they can use that time profitably in the 0bama Youth Movement.


13 posted on 02/26/2009 9:31:35 AM PST by henkster (0bamanomics: "I'll loan you all the money you need to get out of debt.")
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To: Richard Kimball

they fixed the default rate problem.

they made student loans non dischargable in bankruptcy.

This was essentially the same as inflating mortgage securities.

lenders are free to lend absurd amounts of money for worthless degrees because they know they are protected from discharge.

notice how junk degrees proliferated in the era of nondischargable student loans.


14 posted on 02/26/2009 9:32:55 AM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: cowtowney

Obama and the Dems are doing to college education what they did to housing.

Subsidize it by giving below market loans + give the colleges govt. grants + then the colleges get free money from alumni =

???

Answer? Inflated college tuitions, massive building campaigns, debt, debt debt.

Then to this cauldron you add a bad economy and lower demographics of kids college age.

Finally, you add the fact that the higher college tuition can not be paid off with graduating salaries...equals?


15 posted on 02/26/2009 9:33:14 AM PST by cowtowney
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To: cowtowney

bump for later.


16 posted on 02/26/2009 9:37:19 AM PST by Centurion2000 (01-20-2009 : The end of the PAX AMERICANA.)
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To: henkster

I didn’t say it made it better. This is about wealth transfer, not making things work. I also hope it didn’t sound like I was in favor of it.


17 posted on 02/26/2009 9:37:42 AM PST by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: longtermmemmory
That was, IIRC, done under a Republican administration. The money for student loans was still drying up, because lenders started realizing that they still weren't going to get paid.

My suspicion is that this program is to provide education cash. Instead of making it a straight grant, they make it a loan, but if Sallie Mae never files a credit default report, it essentially ceases to be a loan and becomes a gift. I work for a college, and student loan sources were drying up.

18 posted on 02/26/2009 9:42:48 AM PST by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: cowtowney

Get a federal college loan, go default and never see another tax refund until it’s paid off.


19 posted on 02/26/2009 9:49:17 AM PST by Rebelbase
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To: Rebelbase

That is what does indeed happen; people with defaulted student loans, and who don’t pay, have their tax refunds (if they don’t withhold correctly!) applied to the debt, as well as their social security payments. The gov’t does wage garnishment too.

I suspect the Dept of Ed does a better job collecting debt than the IRS does, as the Dept of Ed uses private collection agencies (not sure if the IRS does yet).


20 posted on 02/26/2009 10:00:47 AM PST by olivia3boys
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