Obama praises House for student lending reform

President Barack Obama took a swipe at student lenders on Monday, telling a crowd gathered at a New York community college that his administration remained committed to ending "unwarranted subsidies" to private loan companies.

The president also praised House lawmakers for passing a bill that does just that: allows the government to lend directly to college students, while investing much of the savings in the federal need-based grant program. He also assured audience members that the reform would clear the Senate and reach his desk in due time.

"Right now, the federal government provides a subsidy to banks to get them to lend money to students. The thing is, the federal government also guarantees the loans in case the student doesn't repay," Obama told those gathered at the Hudson Valley Community College. "So we're subsidizing banks to take on the risk of giving loans to students even though taxpayers are absorbing the risk anyway. That doesn't make much sense."

"So we hope to improve on this bill in the Senate and go even further on behalf of students," the president added.

The House bill Obama described -- the Student Aid and Fiscal Responsibility Act -- handily cleared the chamber on a 253-171 vote last week. But the effort, which would in effect rewire the $92-billion student loan industry by shutting out private companies, received far less attention than the amendment Republican lawmakers attached to it: an outright ban on all taxpayer funding to ACORN, the embattled community organization.

Obama discussed neither the amendment nor ACORN during his speech on Monday, choosing instead to focus on the education bill itself and his administration's larger effort to rejuvenate the economy. The two goals coincided, he said, because together they could spur innovation and drive investment across all industries.

"And, just as important, these savings will allow us to make the largest investment ever in the most underappreciated asset in our education system, and that is community colleges like Hudson Valley, which are so essential to the future of our young people," the president said.