Opposition is emerging to President Barack Obama’s plan to take private banks out of the student loan business.
Student indebtedness has grown to an average of nearly $23,000 per individual, and student loans remain a lucrative business for U.S. banks, earning $85 billion annually, according to news reports.
The White House plan would cut out the middleman and let students borrow directly from the government, with the hope of making more money available for loans, while saving an estimated $94 billion over the next decade.
Citigroup has already begun an e-mail campaign urging its borrowers to write Congress to oppose the plan, notes Talking Points Memo.
And executives for Sallie Mae, the biggest provider of student loans, said if the plan is adopted as proposed, an undetermined number of banking jobs could be lost.
Company executives said they’re backing a plan that would allow private banks to market loans through the Department of Education, and charge the government a fee for every loan processed, reports the Times Leader of Wilkes Barre, Pennsylvania.
According to the Project on Student Debt, average debt for the graduating class of 2007 was $18,484 at public colleges and $23,065 at private schools.
In 2008, 14 percent of students took out higher interest private loans to finance their education, according to KOMU-TV of Columbia, Mo.
Meanwhile, the default rate on student loans is up nearly 25 percent from the same period last year, from 5.2 percent to 6.9 percent, reports the Times-Herald Record of Middletown, New York.
The same article reported on a Facebook group — Cancel Student Loan Debt to Stimulate the Economy – with 172,612 members in early April.
“Sallie Mae execs want to save jobs”
Times-Leader (Pennsylvania), May 12, 2009
“Citigroup spends bailout money lobbying student lenders to sabotage Obama plan”
Talking Points Memo, May 3, 2009
“Student Loans Increase”
KOMU-TV (Columbia, Missouri), May 5, 2009
“ABCs of the growing crisis in student loans”
Times-Herald Record (Middletown, New York), May 10, 2009
“Sallie Mae’s about face on loan subsidies”
Washington Post, May 10, 2009