American Student Loan Services announced that a bill is being introduced into the House of Representatives that, if signed into law, would create a virtual monopoly that eliminates nearly all competition for supplying student loans and will help students to know which same day online loans are the safest.
It is feared that by driving most competitors for providing student loans, including virtually all smaller lenders, out of the student loan business, the remaining large lenders, without the check of competition, will raise interest rates and fees on its student loans.
The DOE has recently expressed concern that there are problems with the federal student loan program. Officials have stated that there is not enough freedom of choice under the current system of lending, which has seen over 70 percent of all student loans provided by just one lender in the last year.
The DOE at the end of June sent letters to 921 colleges and universities warning them to be wary of limiting choices for students when choosing a lender.
Michael Dannenberg, education policy director of the non-profit New America Foundation, told the Chicago Tribune, “This is a good step…but they should be far more aggressive in policing the relationships between lenders and colleges.”
The DOE has been investigating the lenders that give money to college students since the spring, when it temporarily closed down its databases to the public while it looked into whether or not many of the lenders in the federal network used the students’ information to market other products and services.
In the wake of the expressed concerns about federally-backed student loan providers, who have put millions of kids through college at relatively low interest rates, the House of Representatives has introduced the “College Cost Reduction Act”. The Act is meant to become a law that would help students secure more choices of lenders to finance their college educations.
However, according to the American Student Loan Services organization, this planned law would only be a failure and have the opposite outcome to what its purpose is. It is considered by the organization to be more of a headline-seeking move by lawmakers than a legitimate program.
“No one is against lowering costs for students. This legislation, however, will do the exact opposite. By driving small businesses out of the market, students will have less choice, less customer service and end up paying more for their loans in the long run. Let’s not infringe on the ability of competition to help students just as competition begins. By cutting billions from the student loan program, the Congress is doing a great disservice to students and their families. I am dismayed that members of Congress have failed to include small businesses in their discussion on how to improve the student loan industry and reduce costs for students. If they had, they would have realized that eliminating competition is moving the country in the wrong direction,” American Student Loan Services President and CEO Brian Skowronski said in the press release.
David Robson is the founder of Complus Alliance. He has been writing about different topics for almost 10 years. He’s main focus is delivering quality insights to a wide array of audience.