US: Plan to change student lending sparks fight

The private student lending industry and its allies in Congress are manoeuvring to thwart a plan by President Barack Obama to end a subsidised loan programme and redirect billions of dollars in bank profits to scholarships for needy students, writes David M Herszenhorn in The New York Times. The plan is the main money-saving component of Obama's education agenda, which includes a sweeping overhaul of financial aid programmes.

The Congressional Budget Office says replacing subsidised loans made by private banks with direct government lending would save $94 billion over the next decade, money that Obama would use to expand Pell grants for the poorest students. But the proposal has ignited one of the most fractious policy fights this year. Because it would make spending on Pell grants mandatory, limiting Congressional control, powerful appropriators are balking at it.

Republicans say the plan is proof that Obama is trying to vastly expand government, reports The New York Times. Democrats are divided, with lawmakers from districts where lenders are big employers already drawing battle lines. At the same time, the private loan industry, which would have collapsed without a government rescue last year, has begun lobbying aggressively to save a programme that has generated giant profits with very little risk.
Full report on the New York Times site