Another option for student loans

By Editorial Board

Most students might be tempted by almost anything that may lessen the impact of student loans after graduation.

The government is trying to do just that through the Student Aid and Fiscal Responsibility Act, which is supposed to lower interest rates and remove some of the burden on taxpayers.

The act would amend the Higher Education Act of 1965. Some government officials say the new act will make it easier for students to pay for college.

The government would assume the role of lender by giving loans to middle- and lower-class families, and cutting out the middle man: the banks. Private lenders have been known to raise interest rates for some students during their college career and, more recently, halted lending to others who want loans.

The Student Aid and Fiscal Responsibility Act would enable the government to force private lenders to compete by giving students lower interest rates. This act wouldn’t eliminate the private sector, but would give banks much needed competition.

Officials say this doesn’t just appeal to students. Rather, it has a wide-reaching appeal because when someone defaults on a loan, taxpayer money must make up for those payments and the money is funneled into lending banks. Officials claim that cutting out the banks will save $87 billion of taxpayer money.

According to, the Student Aid and Fiscal Responsibility Act passed in the House with a 253-171 vote on Sept. 17, 2009. Of that vote, 247 Democrats voted in favor of the bill and 167 Republicans voted to deny its passing. The Student Aid and Fiscal Responsibility Act is still awaiting the Senate’s approval.

It is easy for government officials to say they will lower interest rates and make college more accessible to everyone—but these promises need to be ensured.

The private sector has done a poor job catering to students’ financial needs. The government might do a better job, or at least offer more competitive interest rates for the banks to match.

One thing banks may give students that the government can’t is customer service. Customer service often lacks in lending programs. However, the government will be in charge of many loans, and it may be difficult to keep up with the quality service a smaller lender may be able to provide.

Having the government control the majority of student loans doesn’t sound particularly appealing without the added benefits, but receiving a loan in the private sector isn’t enticing either.  Forcing both entities to compete may be the best solution.