Sallie Mae About Face on Subsidies

For the past two decades, every attempt to overhaul the $85-billion-a-year student loan industry by eliminating subsidies to lenders has faced insurmountable opposition from one of the most powerful institutions in the business: Sallie Mae, the world's largest student loan company.

But in a dramatic reversal, the lending behemoth now supports President Obama's efforts to kill the subsidies it has tried to protect for so long. Instead, the company has offered a proposal that calls for the government to hold on to the loans and pay private companies for originating and servicing them.

Sallie's plan is still slightly different from the one advanced by the administration, which entails the government originating loans itself. But the company's turnaround, which surprised many in the industry, could make it more likely that the administration will succeed in transforming the way that millions of students pay to attend college. Read the rest at WaPo

Read about Obama's student loan plan here. Obama wants to end the Federal Family Education Loans program, which subsidizes private lenders, and replace it with the Direct Loan program and give more Pell grants.

Obama's Student Loan Plan

Obama's aim: to make college affordable.
Millions of families are eligible for an annual $2,500 tax credit to help pay for college, he said. The Obama administration intends to reform Pell grants. The administration is raising the max to $5,550 next year, he said. The value of a Pell grant is going to be pegged to a fixed rate above inflation so these grants don't cover less as costs go up. Colleges and universities need to control their costs to make education more affordable. The administration is revising the Perkins system so that it rewards colleges that have affordable tuitions. Obama has called for ending the Federal Family Education Loans.

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