The bill was quietly passed last week alongside health care reform.
The plan will remove commercial banks from the student loan business (right now, they’re responsible for distributing loans) and is predicted to save $68 billion in taxpayer money by 2020.
Under the current system, the government guarantees student loans and is stuck footing the bill if the borrower defaults. In other words, “heads, students pay the bank. Tails, taxpayers pay the bank.”
According to the Atlantic Magazine’s Derek Thompson, the new system won’t make much of a difference for students, but it could have a big impact on education funding. The $7 billion in interest that the government is expected to generate over the next decade (which used to go to banks) will now go towards Pell grants, reducing the deficit, and supporting community colleges.
While the move has been unpopular with private lenders who say it will eliminate jobs, the overhaul seems to have the support of the American public. According to a recent CNN poll, 64 percent of Americans approve of the plan.
This is the third significant achievement by the administration in the past 10 days. In addition to health care reform, the administration brokered an agreement between the United States and Russia on a nuclear-arms-reduction treaty Friday morning.
Notice we don’t hear much from the knee-jerk credits anymore asking “What has he done?”