WASHINGTON, Nov. 28 (UPI) -- Student advocacy groups warned U.S. Treasury Secretary Henry Paulson Jr. that a new program to support private student loans could hurt borrowers.
Several groups, including Consumers Union, the U.S. Student Association and the National Consumer Law Center, wrote to Paulson to complain a $200 billion federal plan to support various consumer loans, including student loans, "will not solve the affordability crisis caused by the failing economy," The Washington Post reported Friday.
FinAid reported 37 private companies have dropped out of the $17 billion-a-year student loan business, but with private student loan rates reaching as high as 17 percent -- compared with federal student loan rates of about 6 percent -- supporting private lending to students "would actually be detrimental to many," the letter to Paulson said.
John Dean, special counsel to the Consumer Bankers Association called the program "welcome news." Michelle Smith, a spokeswoman for the Federal Reserve, said the program was directed toward economic concerns, not the broader implications, the Post reported.
But, Rep. Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee said he was concerned the program "is borrowing the good name of student loans to bail out some very bad actors."