The proposal to end subsidy payments made to banks currently active in student loan market was first floated in last year’s budget request. At the time, the news roiled markets, with the stocks of companies like SLM Corp. (SLM: 10.83, 0, 0%), better known as Sallie Mae, falling sharply as a result.
The result of the ending of subsidies would effectively cut out private lenders from making loans. The Department of Education would become the sole provider of government-backed loans as a result.
There would still be a limited role for banks in servicing loans after they are made by the federal government.
House lawmakers took up the proposal, including it in sweeping education legislation that was approved last year. But the matter has become stalled in the Senate, where a number of Democratic lawmakers are known to have misgivings about the idea.
source here.
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