The Federal government is planning to take over the student loan program from Sallie Mae, saving $94 billion over 10 years. This will make more loans available at a cheaper cost to taxpayers by eliminating the middle man and making loans at a lower rate that only the government can get. Sallie Mae is a private company makes student loan that are guaranteed by the federal government. This is similar to what Fannie Mae did for mortgages before it was nationalized last fall. Sallie Mae made $24.2 billion in loans last year.
What It Means to You
- This move will consolidate student loans under one roof. The Federal Family Education Loan Program subsidizes and guarantees $59 billion in student loans made by private lenders. The Department of Education's direct loan program provides about $15 billion. Savings will also be used to add to the Pell Grants program, above the $17 billion increase provided by the Stimulus Bill. (Source: Bloomberg, Salllie Mae Plans Life Without Loans, May 7, 2009)