The House of Representatives recently passed the Student Aid and Fiscal Responsibility Act. If the Senate votes it up and the president signs it, it could conceivably become much harder for students to get the funds they need to go to college.
The bill would essentially eliminate private banks from officially offering student loans. Under the current system, you can supplement federal and state loans by getting private loans from a bank (which usually takes on your other loans’ responsibilities as well). By removing the banks from the equation, the government may well make it impossible to get the money they require for tuition.
By keeping the marketplace of student loans open, students can gain financial aid from multiple and varied sources. This lets them find the best rates, payment plans and get the appropriate amount of funding. Government loans don’t always cover everything a student needs, and private loans offer the opportunity to pay not just for tuition, but for books and cost-of-living while going to school.
Without a dedicated student loan program, banks will be able to offer loans without the same restrictions, at a much higher interest rate and a faster repayment plan.
Moreover, the last thing the government should be doing is restricting the lending of banks in the currently tight credit market. Student loans from private institutions give many post-graduates a way to build good credit off of a large amount of debt. Just starting out, the good score can help them later get a larger loan for a car or even a house.
Limiting the financial practices of banks is a great idea when it comes to the insane credit devices they created and that destroyed the economy, but not when it comes to important loans for students. The government doesn’t have the resources to pay full tuition for every student (which this bill doesn’t offer) so students need be sure that the ever-rising cost of tuition can be made up for with money from whoever is willing to lend it to them.



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