KENNEDY ON COLLEGE LOANS: Yesterday afternoon I participated in a blogger conference call with Senator Ted Kennedy about the soon to be passed Higher Education Access Act (HEAA). The bill will give an additional $20 billion in financial aid to students without costing taxpayers a penny by cutting excessive lender subsidies. That's the good news. The bad news is that an even stronger proposal, Student Aid Reward Act (STAR) stands no chance of passing, and Senator Kennedy was very frank as to why, saying, "Lenders are too powerful in the U.S. Senate -- I’m sorry to say, among Democrats as well as Republicans -- for that to get passed." STAR would create an incentive for universities to cut lenders and their wasteful government subsidies out of the program altogether by encouraging schools to switch to direct lending, in which the federal government provides the loans itself. So students and taxpayers will see a small improvement when the HEAA is passed, but will continue waiting indefinitely for more basic reform. You can read my recent Washington Monthly article on the higher education lobby for a more complete rundown of STAR and why it hasn't passed.
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