News just recently came out that the Democrats are looking to cram college loan reform in with health care reform through reconciliation. I'm not sure what they intend to put in their package but here's why I think Direct Lending should be included, if anything.
1. Gets rid of the middle man
There's nothing that the banks do with student loans that the department of education can't. If we're going to have these bureaucracies and major departments, it's essential that they work for the people and people only. Banks charge "low" interest rates that the government subsidizes and with these interest payments out of the way, that's extra billions of dollars down the road to either help reduce the deficit or fund other essential programs.
2. Loan repayments are based on proportion
After we graduate college, we're required to make payments 6 months upon our graduation. The problem with this is that often, many college graduates have not yet established steady full time jobs. This was especially seen in the past few years due to the recession. As opposed to paying fixed rates, direct lending allows for proportionate rates of repayment that make it more flexible for recent graduates and helps reduce the financial burden college can have on students.
3. Fiscally responsible
If we can save money in the tens of billions that would've otherwise gone to banks, why not?
4. Increase in Pell grants
Education, like many other essential parts of our life, is not free. In fact, its very expensive and with the increase in its costs, it's only reasonable to believe that we need a system that works better for its students. Increasing pell grants is necessary, given the extent of the financial situation taking place. Pell grants have helped students across the country afford a college education and with an increase in the amounts of pell grants and its value, more wouldn't hurt!
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