Budget: Perhaps the End for Private Student Loans?

Obama’s new budget contained an unexpected wrinkle.  As written, the President’s plan intends to shelve the guaranteed student loan program.  In its place, students would apply for loans directly to the US Department of Education.

The announcement came after markets closed on Thursday.

This sets up a battle between lobbyists for some of the top for-profit names in education (Sallie Mae, Apollo/University of Phoenix, and First Marblehead against the Democrats.

Students generally can get a better deal through the US Department of Education.  In spite of that opportunity, students still went to private loans because rising tuition often outpaced available grants and US Ed loan funds.

Obama believes that the new proposal would save taxpayers approximately $4 billion per year.