Secretary of Education Arne Duncan Wants to Save 85 Billion Dollars Over Ten Years by Cutting the Middle Man

Secretary of Education Arne Duncan with the Obama administration wants to change how financial aid is distributed to students. The new idea was formulated in the Student Aid and Fiscal Responsibility Act, which passed the House of Representatives. The Department of Education would dole out the funds for student loans. The amount that they give the banks is 88 percent of what is loaned out to prospective students. Under the current system about 85 billion dollars, which comes to 88 percent, is given to the banks to give student loans. That money the banks collect the interest and make a nice profit. The system is safe to the banks because the government provides the capital.


Now about hearing, the possible news that this lucrative deal might be lost Sallie Mae has been lobbying Congress for this bill to be defeated. In a New York Times article they figured that Sallie Mae's amount of 4 million dollars averaged to 25,000 dollars a day for when Congress is in Session. For most kids that is a year’s worth of tuition to a private school or a full four years to a state college. Arne Duncan is upset that the banks are using funds government funds to fun the lobbying. In the Huffington Post Duncan was quoted,

I think banks have had a sweet deal. They're a powerful lobbying force, and working-class families don't have lobbyists working for them. They're just trying to make ends meet and pay to go to college. And so you have strong, entrenched interests that have lobbied and continue to lobby to this day, and they're running ads in states. And you have, on the flip side, millions of working-class families trying to do the right thing and go to school.

The reason why this has not been put into law is that like the many other laws that the House of Representatives have passed they are stalled in the Senate. Lobbying efforts by the banks have been more successful because of the worries that this measure will cut jobs in the financial services industry and leave the United States with more debt from students that do not payoff their loans.


For something like this to pass the Senate, it is needed that people call their Senator to tell them that we want Student Aid and Fiscal Responsibility Act. This law is in the Senate Committee on Health, Education, Labor, and Pensions. It is in every student’s best interest to call or write their Senator to pass this bill.