The STAR Act - Billions of dollars for students, not for banks

Federally guaranteed student loans are supposed to help students afford higher education at rates they can afford. Lenders like Sallie Mae provide the loans at low rates, and in return the government guarantees repayment of the loans and provides subsidies to the private companies who give out the loans. The system is supposed to provide incentive for private companies to help students, and it does. It’s been working a little too well, in fact. If you run the numbers on the loans, their costs to the private companies, and how much taxpayer money is given to those private companies, the current system is backwards in that it does more for the companies than students. The Cleveland Plain Dealer explains how the system works, and why there is dispute over the funding of the loans. Universities and colleges in Ohio would receive $55 million more in student loans if the money was given directly to students, instead of funneling it through companies like Sallie Mae.

Senator Kennedy and other members of Congress are working to change the system to give more money to students. The STAR Act is bipartisan legislation that would provide billions in additional funds for college students at no addtional cost to taxpayers. The efficiency of the STAR Act compared to the present system would make it possible to give each student with a Pell grant at many collges an additional $1,000. “We waste billions of dollars in corporate welfare every year on student loans, and we cannot afford it any longer,” Sen. Kennedy said in March. “We should use scarce dollars to help students, not banks.”

If you are interested in learning more about the STAR Act and student loans, visit studentaidaction.com or The Institute for College Access and Success. Encourage your Senators and Congressmen to cosponsor the Student Aid Reward Act. Call 202-224-3121 and ask the Capitol Operator to connect you to your Senator’s office.

–Crystal Patterson