Changes in the Way We Pay For College: Who to Believe

In the last year, USF students have found available funds for college dwindling and sometimes nonexistent.  At the same time, incomes and job opportunities are decreasing at alarming rates. While the media concerns itself with the public health care program, the government’s quiet but determined attempts to reform the student loan system have escaped the press. In such turbulent times, what new hurdles should USF students expect when it comes to financing their education in the coming years?

The student loan market operates outside the conventional loan framework.  The government plays a large role in guaranteeing money to students by offering fixed, below-market-rate loans that are not dependent on the complicated structure used by private lenders.  These private lenders directly compete with the government loan program enticing students with superior customer service and competitive rates.

But due to the increased number of loan defaults in 2008 and the resulting bank failures, private lenders have been less inclined to loan funds to students, especially considering the depleted job market available to expected graduates.

As banks find it harder and harder to release credit to potential students, government loans become a larger source of student financing.  In 2008, a temporary restructuring of the student loan market occurred wherein the government started buying up student loans from private lenders. The current student loan bill intends to make the government the sole financer of student loans, totally wiping out competition from the private lenders.

USF students can expect to see a more inefficient, harder to navigate student loan system in the coming years, according to many analysts. Government programs are implicitly inefficient and the current popular bill designing a student loan system entirely run by the government would be no exception.  The disintegration of the private student loan market would wipe out all competition, allowing the government to monopolize the market for student loans.

But the government claims a simplified financial aid process will result from the student loan overhaul, which means that USF students will spend fewer hours struggling with endless FAFSA forms.  Due to the streamlining of the system, the government reports it will save $87 billion over 10 years, half of which is intended to go to the Pell Grant program for low-income students.

Jessica Zuzik, a graduate student in economics at USF, has had many problems garnering financial aid from the school, despite her excellent academic record.  “I feel that USF has forsaken financial aid because they are a private institution.  They have not made it a priority because they feel that students can afford the excessive tuitions.”  Frustrations such as these leave students relying primarily on the government for financial aid, and soon they will add student loans to this list.

Michelle Schaeffer is a graduate student in the economics department at USF.  She writes on economic issues in her blog at


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