EDITORIALS: Help students, not banks

More tuition aid for college students with no extra cost for taxpayers would win top honors at any time. Right now, with families struggling and college costs climbing, reforming the student loan program to take $87 billion that would go to banks, and use it for direct loans to students, is a "no-brainer," as President Barack Obama said.

But legislation the House passed in September to do just that faces a lobbying onslaught in the Senate from lenders desperately trying to hang on to all that money. The Senate should cut out the middleman.

There are two types of federal student loans. One is the direct loan, where tax dollars go straight to students. The other is the Federal Family Education Loan, where Washington not only subsidizes private lenders who make the loans but guarantees the loans, too. If a borrower defaults, the government is on the hook, repaying 97 percent of what's owed. That's a sweet, no-risk deal for private lenders. So sweet that in 2007 state Attorney General Andrew Cuomo caught banks giving college officials kickbacks to funnel borrowers their way.

Reform would eliminate FFEL. All lending would be done directly. And that $87 billion saved by not giving 10 years of subsidies to banks would go to needy students in Pell Grants, to borrowers as tax credits, and to schools. Lenders say the change will cost jobs, and that more students will default.

And more students will be able to afford college. hN