South Dakota student loan companies are awaiting more information on a proposal by President Obama that would place all student loans under federal control.
Moving all direct government college loans out of the private sector would eliminate subsidies for banks and save $4 billion a year, the Obama administration said. Last year, Congress made substantial cuts to student lender subsidies but didn't eliminate them.
Full implementation of such a move would put student-loan companies such as the Education Assistance Corp. of Aberdeen out of business as guarantors, according to Clark Wold, president of the EAC.
But the government has said it intends to use private contractors to process student loans even if the loans all come directly from the U.S. Treasury, Wold said.
"So we are cautiously optimistic that the opportunity would still be available for our company to be involved in whatever program emerges," he said.
Great Lakes Higher Education Corp. of Madison, Wis. - the fourth largest of 35 student-loan guarantors in the U.S. - merged with the EAC in February. Great Lakes is well-positioned to get a contract to process direct government loans, Wold said.
Wold said a potential switch would mean schools would have to change the way in which they administer loan programs.
"(The Federal Educational Loan Program) has worked well in South Dakota for 30-plus years," Wold said of the private system. "We believe the same service of lenders and the EAC would be lost to students and parents in South Dakota.
"I think it's extraordinarily important because the student loan process can be, in very many ways, intimidating."
Wells Fargo Bank in Sioux Falls - another private student loan lender - said in a statement that it acknowledges the president's proposed budget and is encouraged by the administration's focus on finding new ways to ensure a high-quality education is available to all.
Moving all direct government college loans out of the private sector would eliminate subsidies for banks and save $4 billion a year, the Obama administration said. Last year, Congress made substantial cuts to student lender subsidies but didn't eliminate them.
Full implementation of such a move would put student-loan companies such as the Education Assistance Corp. of Aberdeen out of business as guarantors, according to Clark Wold, president of the EAC.
But the government has said it intends to use private contractors to process student loans even if the loans all come directly from the U.S. Treasury, Wold said.
"So we are cautiously optimistic that the opportunity would still be available for our company to be involved in whatever program emerges," he said.
Great Lakes Higher Education Corp. of Madison, Wis. - the fourth largest of 35 student-loan guarantors in the U.S. - merged with the EAC in February. Great Lakes is well-positioned to get a contract to process direct government loans, Wold said.
Wold said a potential switch would mean schools would have to change the way in which they administer loan programs.
"(The Federal Educational Loan Program) has worked well in South Dakota for 30-plus years," Wold said of the private system. "We believe the same service of lenders and the EAC would be lost to students and parents in South Dakota.
"I think it's extraordinarily important because the student loan process can be, in very many ways, intimidating."
Wells Fargo Bank in Sioux Falls - another private student loan lender - said in a statement that it acknowledges the president's proposed budget and is encouraged by the administration's focus on finding new ways to ensure a high-quality education is available to all.
