This editorial appeared in The Sacramento Bee.
When Treasury Secretary Henry Paulson announced that he wanted to extend $60 billion of the $700 billion rescue package to non-bank credit card and auto loan firms, this page called it "an irredeemably bad idea." We urged Congress to stop this idea before it went any further.
Well, there's another piece of this proposed non-bank rescue: Paulson wants to use some of the $60 billion to bail out providers of high-cost private student loans – the "alternative" student loan market that had expanded with little federal oversight during the early part of this decade.
That idea is irredeemably bad, too, and Congress should weigh in to stop it.
The overwhelming majority of students do not use private loans to pay for college (only 8 percent of students in the college Class of 2007 took out private loans, according to the Project on Student Debt). And during the current credit crunch, federal Stafford, Perkins and PLUS loans are as available as ever to students and families at all income levels. This bailout is unnecessary.
Higher-education groups, including the American Association of Collegiate Registrars and Admissions Officers and the American Association of State Colleges and Universities, have urged Paulson not to bail out "providers of usurious private student loans." The interest rates and fees on these private loans, they note, can be as exorbitant as those of credit cards.
To read the complete editorial, visit The Sacramento Bee.