Debate Over Student Loan Lending

[Undertow]

Having posted the University thread and seeing that many of you attended some form of college-level education, there is a good chance that many of you have student loans.

Considering the recent scandals with student loan companies such as Sallie Mae, and considering Presidential candidate Barak Obama's stance on Direct Lending, I pose the following topic to you familiar with, or interested in, the state of our student loan industry in the US:

The schools are divided between two types of student loan lending: Direct Lending (aka Direct Loans, aka William D. Ford Stafford Loans) and Federal Family Education Loan Program Lending (aka FFELP Lending).

Direct Lending is considered a "primary" lender because the money is funded directly through the Federal Department of Education (rather than through a lending institution such as a bank or credit facility).

FFELP Lending is considered a "secondary" source because the money is funded through lending institutions, banks and credit facilities (and NOT through the Department of Education).

All loans under these federal programs are the same, i.e. a Direct Stafford loan is identical to a Sallie Mae Stafford Loan. The student saves no money from one or the other - they are the same.

If College A is a Direct Lending school and College B is a FFELP lending school, students at College A must receive loans through Direct Lending and no one else. Students at College B may choose who their loans come through - any lender, any institution.

Should the US abolish privately owned student loan lending corporations in favor of a behemoth, more uniformly managed Direct Lending Service? Or should the US nod in favor of private industry and switch all schools to FFELP lending schools?

p.s. I might add that FFELP lenders currently offer discounts and incentives for consecutive on-time payments whereas Direct Lending does not.

 

[Lincsong]

Sounds too political there. This is a debate over the role of government in higher education. I can see this thread getting political real quick. That being said; good night.

 

[jake_fink]

tic tic tic tic tic tic...

 

[Samsa]

tic tic tic tic tic tic...

Counting down the minutes until this thread is closed for engendering political disussion?

 

[Hemingway Jones]

Sorry folks, I am sure this thread was written with the best intentions, but this one skirts too close to the political line. In fact, in its references to political candidates and government program, it freely crosses it.

The “No Politics” ban was instituted during an election cycle, so it may be a good time to remind everyone that there are thousands of other things to speak of here at the Lounge.