Student Loan Interest Rates May Soar
Instead of continuing to let a state agency handle the program, Blunt wants to sell the business for $400 million to the private firm Sallie Mae Loans, which might cost students more money.
Thousands of college students will be affected by the possible sale of the Missouri Higher Education Loan Authority, or MOHELA, to Sallie Mae. As a non-profit organization, the State Loan Authority used extra money it collected to provide lower-interest loans for college students.
But, a change in ownership could raise loan interest rates. Democratic lawmakers say privatizing student loans will hurt everyone.
"This is a time in our state's history where we need to be sending more people to higher education and, unfortunately, the governor's plan is going to make that more difficult. It will be harder to get student loan rates, and the rates that you do get will inevitably be higher."
By privatizing student loans, Missouri could spend the money on new campus buildings and life science research at state universities.
"I think the loans are more important just because they're building all the buildings on campus anyways, built into tuition or by donation."
Sallie Mae has tried to buy other state-controlled loan organizations, including one in Pennsylvania. In fact, the Pennsylvania Student Loan Authority wrote to Blunt and other Missouri officials to warn the financial aid market will lose its balance between service and profit, as well as hurt students and their parents.
Gov. Blunt wouldn't comment Wednesday night, but he'll be at the MU School of Medicine on Thursday to explain how his plan will help, not hurt, Missouri higher education.
But, the head of Missouri's student-loan agency is out of a job already, after expressing doubts about selling the agency and putting the money into higher education. MOHELA's board of directors announced Wednesday it replaced Executive Director Michael Cummins immediately. The board also said it voted Tuesday night to cooperate with Blunt in considering proposals to sell the agency's assets.