Banking News: Citibank (NYSE: C) and Wells Fargo (NYSE: WFC)’s Student Loan Businesses to be Regulated out of Existence
Citibank (NYSE: C) and Wells Fargo (NYSE: WFC)’s student loan businesses are under threat as Congress works on the most significant overhaul of the financial aid system since it was introduced in the 1960’s, leading many to believe that Citibank’s and Wells Fargo’s lucrative student loans businesses soon may out of business as the government works to federalize student loan offerings.
At the heart of the legislation, Congress is aiming to get subsidized private companies out of the student lending business and turn it over to the government. Some predict that the proposal will eliminate up to $80 billion in costs by the end of the next decade by eliminating subsidies that are paid to lenders to keep their interest rates down.
The savings from the payment would be used to make colleges more affordable for low-income individuals by increasing the maximum Pell Grant by $1,400 up to a maximum of $6,900. In order to make up for the lack of affordable private student loans that are expected, the government is planning to offer additional low interest loans to students.
Although the legislation will result in an immediate increase in jobs, many are worried that the thousands of workers employed by banks offering subsidized student loans will be laid off.
One of the cities that would be hit by the legislation the hardest is Sioux Falls, SD, which has over 1,200 people that work in student lending services for Wells Faro and Citibank. Because of South Dakota’s lax lending regulations, many companies such as Premier Bankcard, Citibank and Wells Fargo have their headquarters for their credit card and student loan businesses in South Dakota.
“This is a significant book of business that they are involved with and if it goes, the jobs go with it,” said Sen. John Thune, R-S.D. If the legislation passes, it’s estimated that up to 3,000 jobs could be lost across the state.
Both Wells Fargo and Citibank, two of the five largest student loan lenders nationwide, originate and service loans through the Federal Family Education Loan Program (FFELP), the system that accounts for three-fourths of all student loans.
The student loan reform legislation passed the U.S. House in September with a vote of 253-171 and will be going before the Senate early next year.




Out of South Dakota and into Washington, DC. Great. Don't the banks have more experience at making and collecting loans? Is the Federal Government going to use the Justice Department to get students to pay them back? Why not just be honest and call them grants and be done with it? Are we going to centralize everything?
Good- the banks deserve to lose it. They should have been offering the loans at that rate without taxpayers having to subsidize them for their “generosity.” They're just reaping another reward for their greed.
This will be the largest spending on education in our history, and at a much needed time. Eliminate the middleman and send the savings to students–this is what SAFRA will do. It's funny that Republicans are complaining about job loses. The other argument about competition is old and tired and doesn't apply.
This will be the largest spending on education in our history, and at a much needed time. Eliminate the middleman and send the savings to students–this is what SAFRA will do. It's funny that Republicans are complaining about job loses. The other argument about competition is old and tired and doesn't apply.
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Hei… I read your information from begining to the end and I think that is interesting information.. I think i will tell this information again to my friend and I hope this information will be usefull for them… oh yes I have similiar blog about STUDENT LOAN TIPS and I hope you don't mind to check my blog on http://top-studentloans.blogspot.com/ , I hope the article on my blog will be usefull for you… and we can share each other. thank you…
Thank u
The process of applying for a Pell Grant begins when you fill out a Free Application for Student Aid.