Government should consider burdens of new loan program

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    President Barack Obama’s proposed 2010 budget contains some lofty goals, including one aimed at increasing funding for Pell grants through the elimination of subsidized student loans made by private banks.

    If the current version of Obama’s budget passes, these loans will be replaced with direct government lending.

    The objective of Obama’s plan is noble. It would essentially cut out a middleman, the bank, from the process of getting a student loan, which would make securing a student loan much more convenient. Instead of choosing which private bank to go through, students would simply go through their university to secure a government-funded loan. Eliminating the bank’s role could also mean lower interest rates.

    Another important benefit is the amount of money that could be saved and used to provide more grants for college students. In addition to the elimination of subsidized loans through private banks, Obama’s budget calls for the elimination of the Federal Family Education Loan program. According to the proposal, replacing the FFEL program with the Direct Loan program would save about $94 billion, which would go toward funding Pell grants, during the next 10 years.

    However, the benefits of Obama’s plan will only be realized if the government is able to run the Direct Loan program efficiently.

    The government has a lot on its plate right now; perhaps it is not the time to begin a program that will almost certainly require a massive expansion of a government department.

    Furthermore, the system might get clogged up because of the high number of applicants for students loans. Just think about the hassle involved with getting a driver’s license. Most government-run offices, such as the Department of Public Safety, are inefficient and unpleasant. The private banks that compete for clients’ business have incentives to provide services that the government just won’t be able to.

    Although efforts to provide students with more funding for their education should be applauded, now may not be the time to implement a program that would require so much attention from the government.

    News editor Logan Wilson for the editorial board.