Private-Sector Student Loans Preferred by Public, Study Finds
de Senerpont Domis, Olaf, American Banker
Bolstering the banking industry's case, a new survey found that the public prefers to get student loans from private sector institutions than from the government.
The survey, sponsored by the Coalition for Student Loan Reform, found that 72% of the public believes banks and other private lenders should make higher education loans. The poll was based on interviews with 1,000 randomly selected individuals.
"The poll results don't surprise me at all," said Rep. Lindsey Graham, a Republican from South Carolina who sits on the House Economic and Educational Opportunities Committee. "I wouldn't want a bunch of educators in the Department of Education to run the bank."
Sixty-two percent of respondents said the private sector can distribute funds more effectively and provide better customer service than the federal government.
The Department of Education is currently engaged in a test to determine if the government can manage the student loan program more cheaply than the private sector.
While President Clinton has called for the expansion of the direct loan program to serve 100% of the market, current law states that the government-run program can take over only 60% of the market by 1998.
Rep. Bart Gordon, a bank industry ally on this issue, said student loan programs should not be run by the Department of Education. …