President Obama Cuts Out the "Middleman"

Online, May 12, 2010 (Newswire.com) - President Barack Obama is currently overseeing the largest rewrite of federal college aid programs in 40 years with legislation that passed at the end of March. Starting in 2014, the federal government -- not private banks -- will become the primary lender to college students. Obama says that by "cutting out the middle man," banks that charge fees to issue government loans, the student loan program will save an estimated $68 billion. "Those are billions of dollars that could have been spent helping more of our students attend and complete college," Obama said.

It is not yet clear whether the student loan 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 unsecured loans and other forms of credit remain unaffected by the bill.

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While a significant majority of Americans support the reforms - a CNN /Opinion Research Corporation telephone survey of 1,030 adult Americans found 64 percent of respondents approved it, 34 percent opposed it.

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 unsecured loans and other traditional forms of credit, the only difference being that private loans are not subsidized by the government.

The measure aims to reduce the role of private banks from the federally subsidized student-loan market, and also would lessen the burden for some graduates as they pay back their loans. It also attempts to greatly simplify the student loan process and offers more financial help to lower-income students.

Find out if you pre-qualify for a personal loan or small business loan. Click here to learn more about using unsecured loans to finance your educational expenses.

The average American student graduates more than $23,000 in debt. About half of college students receive federal student aid and 8.5 million of them receive Pell Grants.