College Guide


February 09, 2010 1:31 PM Direct Lending to Create American Jobs

By Daniel Luzer

As the College Guide reported last week, student loan corporations are lobbying hard to prevent direct lending, arguing that the change in student loans will put Americans out of work. Well not that many Americans. According to an article in the Scranton Times-Tribune:

The industry contends that the direct loan program would cost jobs, including at a processing center in Wilkes-Barre operated by Sallie Mae, the largest private student loan company.
But Sallie Mae and three other lenders already have signed contracts with the government to service loans under the direct loan reform. In order to get that contract, Sallie Mae eliminated 2,000 overseas jobs and returned them to the United States. They are servicing jobs. Under the reforms, the servicing part of the industry will grow.

In fact it looks like the student loan industry was already taking steps to eliminate American jobs. At least in Sallie Mae’s case, it looks like direct lending might actually bring more jobs to America.

Private lenders currently make about 75 percent of student loans. Under the House bill, the federal government would essentially eliminate private lenders and school would lend federal education money directly to students.

The more to direct lending is supposed to save save $87 billion over 10 years. This money would be used to enhance Pell grants.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer


  • JM on February 10, 2010 7:23 AM:

    Can this passed by reconciliation? Otherwise drop it in the bin of obstruction. Great idea though. Never understood why it wasn't structured like that to begin with.

  • Miguel on February 28, 2010 1:52 PM:

    Wasn't the government the creator of Sallie Mae. Wasn't Sallie Mae spun off when the government created such a mess with college loans that the default rate rose and rose till the program became insolvent?

    I do think that any company that accepts funds from the citizens of the United States via the US Government should be REQUIRED to keep all jobs within the shores of this nation, I do not believe for one minute that the government is any good at providing direct services to the citizens of this nation. Name one government agency that is efficient with our taxpayer dollars.

    This is just another progressive measure to give government more control. When it fails, you and I will be the ones who will pay the bill for all those students who default on their loans or who through some act of government are "forgiven" their debt. There's no free lunch except in Washington where they get suckers like us to pick up the bill.