Recently, ASU’s student newspaper ran an article that said the Student Aid and Fiscal Responsibility Act (SAFRA) would actually help students. That’s a blatant lie.
The article (linked here), said that private lenders hurt students, and this bill will help students go to college without mountains of debt. Problematically, this bill only creates unnecessary reform to the student loan industry and doesn’t enable colleges to lower tuition rates. Instead of having the option to take a student loan out with a private company, a non-profit, or through the government, SAFRA will simply make all loans go through the government. But students will still have to take out the same amount out in loans and pay back the same interest rates.
Should SAFRA pass, it will hurt banks, which are already hurting because of the recession. It will also put the few barely surviving non-profits out of business, and in the end will remove options for students.
Keep in mind private lenders (banks) and non-profits are able to offer students a variety of services the federal government can’t (and won’t, ever). For instance, several private lenders reduced the interest rate for students, eating the difference. The top non-profits have simply not charge the fees mandated by the federal government, and both non-profits and private lenders offer budget classes and counseling that gives us students the information we need to pay back our loans when the time comes (six months after graduation). Additionally, non-profits and private banks, noting their own struggles for survival, understand that students who cannot find jobs can’t pay back their loans, and offer things like a forbearance, giving students more time to find a decent job, which will enable us to pay back our loans.
The thought is that SAFRA is sweeping change. That it will suddenly provide more money for students if the government takes over the student loan industry. But the federal government is already in the market of student loans! In fact, about 80% of all student loans go through Uncle Sam. The government simply issues loans through a procedure know to students as “direct lending” – providing no counseling, no options, no “perks” (in the form of removing fees and lowing interest rates), and already offers students at various colleges no options when they take out and later can’t pay back their loans.
Further, in the event that a student doesn’t pay back the loan, private-lenders and non-profits are required to have guarantors. These are companies (and in some cases, also non-profits), who pay back the loan in the student doesn’t. It costs the tax payers nothing. But if a student doesn’t pay back a loan through the federal government, the tax payers get to pay it instead.
The notion that this “sweeping change” is a blatant lie. Instead, should SAFRA pass, as it appears it will, Democrats will have socialist the student loan industry, and students will lose options and tax payers get to pay the difference.
While I am a Democrat, and agree with them on many important issues, this is one place I think the Democrats have it wrong, and it’s sad to watch them have no concern for students and their well being.