Banks and Lenders Warn Student Loan Reform May Not Deliver

Online, October 10, 2010 (Newswire.com) - The full effect that new laws reforming the way college students obtain federally subsidized loans will have on borrowers' in the long run is still subject to some debate.

A recent CNN /Opinion Research Corporation telephone survey of 1,030 adult Americans found that 64% of respondents approved of the reforms, while 34% said they opposed them. While student groups and Democratic lawmakers praise the changes as long-overdue, many lenders as well as officials at Sallie Mae, the largest student-loan company in the US, oppose the changes and contend that the reforms will reduce students' lending options and eliminate jobs at many banks and private lenders, hurting the recovery of the economy. "This legislation will force Sallie Mae to reduce our 8,600-person workforce by 2,500," said Conwey Casillas, a Vice President at Sallie Mae, after President Obama signed the reforms into law on March 30th.

Most Republican lawmakers also were opposed, fearing that the legislation amounted to a government takeover of the student loan industry.

The new law still allows private lending institutions to make signature loans, unsecured personal and other loans, but the federal government does not subsidize private loans any longer. If you are interested in finding out more about using unsecured personal loans to finance educational expenses, click here.

Until now, there have been two federal loan programs. Under one, the government makes loans directly to students, a program that now will be expanded. The other is the Federal Family Education Loan Program. Under it, banks and lenders make loans that the federal government guarantees or insures. It will end July 1st. Under the new law, students will still have the option to finance their education privately, through signature loans or other types of personal loans.

Although many outside the industry praise the changes as needed reforms, only time and experience will show whether the lending reforms passed by Congress and signed into law by President Obama at the end of March will have the positive effect that the President is looking for. It is clear however, that signature loans and other forms of credit remain unaffected by the bill.

Find out if a signature loan, personal loan, small business loan or payday loans is what you need. Click here to learn more.