Ok..so banks and student loan companies are charging 5.30% for Stafford and over 6.00% for PLUS loans to borrowers and then charging the government 9% for the same loans due to a loophole in the student loans laws... This has been going on for years and no one in Congress seems too concerned with closing the loophole (now you know how powerful the bank lobby is in Washington).

This is such an outrage. Banks have been getting millions that they don't deserve and the only incentives they can give to students and parents is a lousy small percentage decrease in your loan rate if you consolidate with them.

BTW..the holder of my loans only gives a small decrease for having the payment automatically withdrawn from my account, I don't get a further 1% decrease.

I am writing to members of Congress in my state and those in PA (Keybank). I urge every student loan borrower to do the same. I do know that Sen. Ted Kennedy has been trying to fix this for awhile.

You are correct in that banks receive a 'subsidy' from the government for their participation in the federal student loan program. I'm not sure what the numbers are, but you do sound correct.

The 'rationale' behind the subsidy is that it encourages lenders to 'give back to the community'. Not all banks participate in student loan funding and there is a push to make Direct Lending the only way to borrow federally backed loans.