Both candidates support loans as a way to help students pay for
college. Obama’s plan seeks to increase loan forgiveness, a
federal program that cancels all or a portion of a student’s
loan, most often in exchange for some form of public service.
McCain, however, has voted against programs to provide loan
forgiveness on two occasions.
See more on how the candidates plan to work loans into their
overall plans to help students pay for college in Part 4 of
Mason Votes’ series on college affordability.
Obama’s plan is to provide partial loan forgiveness for
students who choose to pursue public service after college. His
only opportunity to vote on loan forgiveness during his time in
the senate was the College Cost Reduction Act, which he did not
Though McCain is against loan forgiveness, he does seek to
change the system by increasing the availability of loans to
pay for higher education.
“As far as college education is concerned, we need to make
those student loans available,” McCain said, in the last
“John McCain has proposed an expansion of the lender-of-last
resort capability of the federal student loan system and still
demand the highest standard of integrity for participating
private lenders,” according to the McCain campaign website.
What does that mean? A lender of last resort is an institution
that only deals with clients who have the highest risk. A
lender of last resort charges high interest rates to take on
credit that may never be repaid. American Student Assistance,
one of the largest and oldest Federal Family Education Loan
agencies, sees this type of program as a last ditch measure.
According to NPR, the Federal Reserve hasn’t used its powers as
a lender of last resort since the 1930s, until the economic
Private loans are used by 8 percent of students and average
$7,694, according to Sallie Mae, a student lending giant.
However, private student loans, known for high interest rates,
have been decreasing, with more then two dozen lenders
decreasing the amount available to students or cutting their
programs entirely late this September. Alarmingly, a number of
the major private lenders are the same banks who have collapsed
in this year’s economic crisis.
Sallie Mae itself has had its stock plummet and been forced to
close 20 loan offices just last week. One of the largest and
best known student lenders, Sallie Mae announced this week that
it will be providing fewer loans at higher prices, leaving many
students wondering where else they would go to find student