(U-WIRE) ANN ARBOR, Mich. – An offer made Wednesday by President Clinton to reduce interest rates on student loans is good news to university students across the nation.
The reduction Clinton is touting will cut the interest rate on student loans from 7.8 to 7 percent, potentially saving each private university or college student who takes out a loan $850 a year.
“I am pleased to announce that we are proposing improvements in the student loan program that will lower the cost of college for millions of students and their families while preserving their access to the loans they need,” Vice President Al Gore announced at a press conference Wednesday.
Although the reductions had been scheduled to go into effect July 1, many lenders are worried about the loss in profits that would result from an interest rate reduction, said Thomas Butts, University of Michigan associate vice president for government relations.
“The problem is the bankers and lenders in the guaranteed (loan) programs don’t like losing money,” Butts said. “They want our students to pay more to subsidize their profits through the loan industry.”
Butts said two types of student loans exist – direct and guaranteed. Lenders fund the guaranteed loan program, while the federal government puts up the money for the direct loans. Since the lenders have been so successful, they have started to corner the market on student loans, Butts said.
“They’ve been making so much money that they’ve been offering discounts to discourage universities from participating in direct loans,” Butts said. “The bankers will still make a modest profit. Our problem is that they’re trying to drag our students into the problem, and we have been objecting vigorously to that.”
Now that Clinton and the Department of the Treasury have ironed out many of the objections the lenders have expressed, university students will come out as the beneficiaries, said Jackie Parker, an education policy advisor to Sen. Carl Levin (D-Mich.).
“When you take a student attending a four-year public college saving $650 and a private school student saving $850, it has a very positive impact,” said Parker.
