Obama's student loan reforms draw critics

WASHINGTON, May 4 (UPI) -- U.S. President Barack Obama is girding for a fight over his proposals to reshape how college loans are generated, analysts say.

Congress this week will begin considering the massive changes Obama has proposed in his budget which envision a far bigger role for the federal government in financing college tuition loans. As managed under the private sector the loans have produced a debt crisis for students who are defaulting on huge amounts because of the economic downturn, The Washington Post reported Monday.

Access to higher education, especially for needier students, is also being restricted as private lenders become more reluctant to issue loans. Obama is proposing to expand the Pell Grant program by consolidating student lending under the U.S. Department of Education, which he says will save the taxpayers $94 billion over 10 years by eliminating private lenders from the equation.

That, however, has mobilized private sector opposition from the banking industry and from those who decry establishing of an "entitlement program" during a recession, the newspaper said.

But House Education Committee Chairman George Miller, D-Calif., told the Post the credit market upheaval "pretty much makes the case" that private lending is an unreliable source of college aid.