So I stumbled upon this article today (actually props to Shane for the link):
http://www.nytimes.com/200
Basically, it says Obama wants to replace the current system of federally backed private loans with a directly-funded federal loan program.
Huh, you ask? Well the current system basically works like this: When you apply for college (or grad/law school) loans, assuming you are eligible for federal aid (FAFSA), your loan is financed by private banks. The federal government promises these banks up to a 97% return on their investment, and they pay these banks the highest possible interest rate on those loans so that you can skip class, do keg-stands, and barely pass your classes for four years without worrying about the insane amount of money your "education" is costing you.
Sounds like a pretty nice system, no? The banks get paid, you get your diploma (which you soon realize enables you to do pretty much nothing), and the government covers the tab. Only problem is, it pre-supposes that the banks are going to take that money (which they are basically getting for free care of YOU, the taxpayer) and re-invests it back into the economy somehow. Only now, with the economy turned to shit and banks refusing to loan out so much as a cup of flour (it seems they won't even let us eat cake), the system is pretty much failing. That is, unless you're the bank and you're handing out risk-free loans, and still collecting fat payoffs from the government to do it, then using that money to pay executives huge bonuses, buy jets, and generally spit on the American taxpayer.
Well Obama, being the quick-wit he is, has decided that enough is enough, and plans to cut out the Banking middle-man and just have the federal government finance the loans itself. While this sounds expensive, the move will actually SAVE the American government over $94 billion dollars over the next ten years. And unlike the private banks, who would use that money to buy Gulfstreams and platinum-plated monocle holders (its tax deductible?), the federal government would use this money to INCREASE Pell grants to the poorest students.
So let's see: It saves the government money, simplifies the complicated process of obtaining college loans, AND increases the number of kids who can go to college? Who would be against that?
Oh yeah, banks. Seems like begging for hundreds of billions of dollars hasn't taught them any restraint (go figure). In spite of the fact that they are being kept afloat by federal funding as it is (I guess our guaranteed money wasn't enough?), they are fighting tooth and nail to make sure Congress doesn't pass a new bill that will eliminate them as the middleman and thus end the current system that has become a windfall for them.
The banks have hired lobbyists, phoned congressmen, and mobilized the troops for all out war with the Obama administration. With hundreds of billions of dollars of (taxpayer) money to play with, it's hard to imagine this very special interest won't get its way. Ah, democracy at work.
A couple months ago, I realized I wasn't going to have enough money to make it through the semester. Naturally, I sought the advice of the financial aid department at Hastings, who told me I could apply for an extra Grad Plus loan in the amount of $2200. I applied for the loan, filled out the necessary paperwork, and waited patiently for the funding that would keep me from either dropping out of law school or becoming a "private escort" in the Castro. I waited, and waited, and waited. Finally, after almost a month, I found out from Bank of America that my loan for $2200 had been rejected.
REJECTED!? ITS A FEDERALLY BACKED LOAN! Did the "Bank of Opportunity" feel like Uncle Sam wasn't good for it? No, in fact, they ran a credit check and found out that I had a "collection" reported for medical bills from undergrad - in the amount of $117. I believe the conversation went something like this:
Me: "I have an excellent credit score, three credit cards with zero balance, a flawless credit history, and you're saying you won't loan me $2200 for school because I owe MSU $117?"
Bank: "Yes sir."
Due to the ongoing investigation, under the advice of my attorney, I can't divulge the rest of the conversation.
So what was I supposed to do? I'm broke, I can't pay my bills, my family's on the other side of the country, and the bank that is supposed to be taking care of me, the bank that the government is PAYING to take care of me, has basically told me to piss off. I honestly started making a list of friends whose couches I could crash on for the next, oh, two years.
Luckily I was able to get the financing in the end. From my mother. That's right, while Bank of America couldn't scrounge up enough change to loan me the cash, my 56 year old mother who is on disability and social security could. No, she doesn't own a house. No, she's not wealthy. No, she didn't cash out her 401k. She simply saw that I was in a tough spot, and did what she had to do to make sure I was okay. When I told my mom I felt horrible about taking her money, she replied with this:
"It's okay. Someday you're gonna be making money, and then I will get it aaalllll back."
She laughed, but the notion stuck in my head: My mom, who has almost no disposable income and zero training in finance or economics, could look at my situation and see that I needed the money and that it was a worthwhile, safe investment, and yet Bank of America couldn't. How was that possible? What did my mother see that Bank of America didn't?
I suppose the short answer is me. My mom saw a person, not just a profit margin. Somewhere along the line, while banks were enjoying record profits from these federally backed loans, paying out huge bonuses with our money, and sewing the seeds of the housing and financial disaster, they forgot that those numbers had faces, that these loans were more than just calculated risks, that they were our FUTURES. They forgot that the reason these programs existed was to help US.
Now they want to keep the government from pulling the plug on their little racket. And they're going to succeed, too, unless we make a big enough deal about it.
So call, write, email, protest (I hate parades, but I'll make an exception for this one time), do what you have to do, but let Congress know that the era of big banks controlling our education needs to end.
As for me, I need to get back to outlining. My mom charges 9% interest.
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