By Karina Martinez-CarterThe Daily Northwestern
When Democratic presidential candidate Sen. Barack Obama (D-Ill.) and his wife, Michelle, graduated from law school, their combined debt surpassed their apartment mortgage for about eight to nine years.
“Cost is one of the biggest problems in higher education, and it’s something you and I are aware of intimately,” Obama said during a conference call Tuesday with representatives from several college newspapers.
With his experiences in mind, and the concerns college students on the campaign trail have voiced, Obama discussed his plan to restructure the student loan system to be more cost-effective and provide aid to more students.
Obama’s plan focuses on eliminating the relationship between private lenders and universities, which he said would save billions in taxpayer’s money. Instead of banks disbursing loans to college students through financial aid offices and then having the government make subsidy payments to banks, all loans would be distributed from the government through a direct loan program.
“One way we can make college more affordable is by reforming a wasteful system that profits private banks at the cost of taxpayers,” Obama said. “Through a direct loan program, this year alone we would’ve saved $6 billion that could’ve funded one million need-based Pell Grants for struggling students.”
Obama’s proposition, which he originally pitched in 2004, comes in light of the rising cost of public and private universities and recent scandals involving illegal arrangements between school and private lenders. Over the past five years, according to the College Board, the cost of public universities for in-state students has ballooned 35 percent, and the cost of private colleges and universities has risen 11 percent. In February, Northwestern President Henry Bienen announced a 4.96 percent increase in tuition for the 2007-2008 school year.
“(The plan) doesn’t solve all the problems, but by taking this one step we can start making college more affordable for every American,” Obama said.
Communication freshman Benjamin Singer said his family would be unable to pay NU’s sticker price without financial assistance. Singer said while work-study, scholarships and need-based assistance all help to pay for his education, loans do not.
“I qualified for loans, but the process was so complicated that I decided it wouldn’t be worth it for the amount of money I would be loaned,” he said. “I would just have to pay interest on it later, anyway.”
The interest rates on all federal loans is 6.8 percent, regardless of whether it is through the William D. Ford Direct Loan program or a loan administered through the Federal Family Education Loan program, said Breanna Piccuilla, a customer service representative for Federal Student Aid. The biggest difference is that for loans under the FFEL program, the federal government pays banks subsidies. Tax dollars pay for these subsidies.
Direct loans are disbursed through the U.S. Department of Education, so the money travels from the government to the university and then the student. The government makes no payments to private companies.
“I think Obama’s plan is good in that it sounds like it will cut out a lot of the bureaucracy and lower the chances of students getting stuck with loans they can’t pay back,” Singer said.
Obama said many college students have already discussed the issue of the cost of college with him, which led him to revive his loan reformation plan from 2004.
“A lot of young people don’t understand why the system isn’t more efficient and beneficial,” Obama said. “I think this generation is less interested in partisan bickering and more interested in practical solutions to solving problems, which is reflected to some degree in this college loan debate. The special interests in Washington have been dictating the terms in which student loans operate.”
Reach Karina Martinez-Carter at [email protected].
