Cutting Lender Subsidies

What's New

On Friday, September 7th, the U.S. Senate and House of Representatives passed the College Cost Reduction and Access Act by votes of 79 to 12 and 292-97 respectively. The bill now goes to the President who has said he will sign the legislation into law. The legislation will Finance increased education spending by reducing subsidies to student lenders. Lenders will receive a reduced rate of return for offering federal student loans and a slightly reduced reinsurance rate from the federal government. As a result, the increased grant aid and loan benefits will have no additional cost to taxpayers.

How You Can Help

Support the STAR Act

Urge your representative to cosponsor the Student Aid Rewards (STAR) Act, which will provide $10 billion in additional need-based grant aid for students at no additional cost to taxpayers.

Overview

Currently, the federal government operates two major programs to provide loans to help students pay for college: the private sector Federal Family Education Loan (FFEL) program and the government’s Direct Loan (DL) program. See a comparison of these programs.

The Student Aid Rewards (STAR) Act supports schools that use the Direct Loan program and offers them half the savings in the form of additional need-based grant aid.

As students carry more loans, the student loan industry has become a hugely profitable business. Fortune 500 ranked Sallie Mae as the second most profitable on their return on revenues.

Sadly, in the face of a growing budget deficit and dwindling aid for students, Congress has done little to help American college students and their parents deal with skyrocketing tuition. Maryland PIRG is pushing legislators to support the STAR Act and make sure that funds for student aid actually help make college education accessible.

As students carry more loans, the student loan industry has become a hugely profitable business. Maryland PIRG is working to lower interest rates on student loans by cutting subsidies to for-profit lenders.

Resource