This is not a good policy. Taking privatized processes and making them public processes only saves money in theory. Very few governmental processes are efficient, and even if the proposed plan begins working effectively, it will be bogged down by later legislation and political change.

Allowing the banks to administer Pell Grants provided a commercial incentive for banks to locate and faciliate student loans. This also opened a door for students who need more tuition assistance than the Pell Grant provides to borrow money for their entire tuition through one shop. Banks competed for these loans, driving interest rates down.

This plan kills that competition, and why interest rates may be low for students, this is an artificially low interest rate which eventually must be paid for somewhere. If typical of most government bills, Obama will look good by deflating student loan costs and increasing acceptance, but these artificial rates will be funded by a decrease in other committments to non-profit institutions.