Today the Wall Street Journal Opinion section missed the boat about the bipartisan effort to transform the way federal student loan programs operate via the Student Aid and Fiscal Responsibility Act. For example, they claim that this reform is a government takeover of student lending. The fact is that the federal student loan programs are already a federal program, established and subsidized by the federal government.
CLAIM: “The pending bill, which has passed the House but is stalled in the Senate, would ban private lenders from making federally guaranteed loans after July 1, 2010.”
FACT: The financial crisis has already caused many lenders to leave the federal student loan programs, leaving many students in a bind. The Direct Loan program provides the same low-cost loans to students as FFELP, with the added benefit of complete reliability, even in an economic crisis. And the bill will foster competition among lenders by allowing private companies to compete for bids to service these loans – ensuring that contracts are awarded to lenders who offer the best customer service and innovations for borrowers. This is competition that will help students and build on the best of what private industry can offer to borrowers.
CLAIM: “The pending bill, which has passed the House but is stalled in the Senate, would ban private lenders from making federally guaranteed loans after July 1, 2010.”
FACT: The financial crisis has already caused many lenders to leave the federal student loan programs, leaving many students in a bind. The Direct Loan program provides the same low-cost loans to students as FFELP, with the added benefit of complete reliability, even in an economic crisis. And the bill will foster competition among lenders by allowing private companies to compete for bids to service these loans – ensuring that contracts are awarded to lenders who offer the best customer service and innovations for borrowers. This is competition that will help students and build on the best of what private industry can offer to borrowers.
CLAIM: “Now the White House and Democrats like California Rep. George Miller
want to go further and convert students from private loans largely
backed by the taxpayer into government loans made and serviced by
government and backed by the taxpayer.”
FACT: It’s ridiculous to argue this is a government takeover, when the federal student loan programs are already a federal program, established and subsidized by the federal government. The Federal Family Education Loan Program (FFELP) now depends on taxpayer dollars not just for subsidies that reimburse lenders when borrowers default on loans, but also for the capital to finance their lending activity altogether. Taxpayers now fund 6 of every 10 dollars in federal student lending activity. They absorb all the risk. There’s simply no reason to keep pumping taxpayer dollars into a broken system when the federal government can provide the same low-cost federal loans more reliably for students and at a lower cost for taxpayers. Under this bill, this federal program will continue to be a federal program, as it always has been, and private industry will continue to have a role, but one that is more effective and cost-efficient for families and taxpayers.
CLAIM: “In this story the administrators have been afraid to speak as the Department of Education pressured them to drop private lenders and embrace the department's own Direct Lending (DL) program.”
FACT: Actually financial aid officers at colleges that have recently begun participating in the Direct Loan program have been speaking out – the Wall Street Journal may just not like what they have to say.
In fact, a July survey conducted by the same association of financial aid officers cited in the editorial, found that 73 percent of financial aid officers said the switch to Direct Loans was easier than they thought. Eighty-four percent said the Department of Education was helpful in the conversion and 61 percent said administering DL was less burdensome than FFEL. 80 percent of those surveyed report that they were able to switch programs within four months.
In testimony before the Education and Labor Committee last May, Anna M. Griswold, Assistant Vice President for Undergraduate Education and Executive Director for Student Aid at Pennsylvania State University, said, “In summary, we believe that by entering the Direct Loan Program, we have shielded our students from the impact of turmoil in the financial markets. The state of the economy will make the availability of student aid funding even more important considerations for families in choosing a college or in determining whether they can even send their children to college in the coming years.”
Charles B. Reed, Chancellor of the California State University, testified that the Direct Loan program has several advantages. He highlighted the single point of contact for schools, student, and parent borrowers, which is easier for schools to administer, easier for staff to deal with students and offer better customer service. Mr. Reed also said that schools do not have to deal with multiple lenders, servicers, and guarantors and that eliminates inconsistencies between lenders and lender response times to students. Additionally the Direct Lending program offers standard borrower benefits. California State University has found a faster origination and disbursement under the Direct Loan program as compared to FFEL program.
CLAIM: “Focusing on the needs of students and taxpayers—rather than an ideological conviction that government always knows and does best—would be a good place to start.”
FACT: We agree it is important to focus on the needs of students and taxpayers, which is why it’s unfortunate that what’s missing from the Journal’s editorial is the perspective of students. The piece spends a lot of time talking about what financial aid officers think, but does not include a single mention of what the actual students paying for college want.
In fact, students across the country are the strongest supporters of the Student Aid and Fiscal Responsibility Act, for good reason. The bill will make student loan programs work in their best interest and will invest the bill’s savings in making college affordable and helping more Americans graduate, while providing reliable, affordable, high-quality Federal student loans for all families. It will prepare students and workers for 21st century jobs by providing all Americans with the skills and resources they need to compete and will ensure that the next generation of children enter kindergarten with the skills they need to succeed in school. Finally, it will meet Pay-As-You-Go fiscally responsible principles and reduce the deficit.
The Student Aid and Fiscal Responsibility Act will finally put the needs of students and taxpayers before lenders and financial aid officers, who have benefitted from cozy relationships and conflicts of interest in recent years. If we’re serious about doing what’s best for students, it’s time to make sure their voices are part of the conversation.
FACT: It’s ridiculous to argue this is a government takeover, when the federal student loan programs are already a federal program, established and subsidized by the federal government. The Federal Family Education Loan Program (FFELP) now depends on taxpayer dollars not just for subsidies that reimburse lenders when borrowers default on loans, but also for the capital to finance their lending activity altogether. Taxpayers now fund 6 of every 10 dollars in federal student lending activity. They absorb all the risk. There’s simply no reason to keep pumping taxpayer dollars into a broken system when the federal government can provide the same low-cost federal loans more reliably for students and at a lower cost for taxpayers. Under this bill, this federal program will continue to be a federal program, as it always has been, and private industry will continue to have a role, but one that is more effective and cost-efficient for families and taxpayers.
CLAIM: “In this story the administrators have been afraid to speak as the Department of Education pressured them to drop private lenders and embrace the department's own Direct Lending (DL) program.”
FACT: Actually financial aid officers at colleges that have recently begun participating in the Direct Loan program have been speaking out – the Wall Street Journal may just not like what they have to say.
In fact, a July survey conducted by the same association of financial aid officers cited in the editorial, found that 73 percent of financial aid officers said the switch to Direct Loans was easier than they thought. Eighty-four percent said the Department of Education was helpful in the conversion and 61 percent said administering DL was less burdensome than FFEL. 80 percent of those surveyed report that they were able to switch programs within four months.
In testimony before the Education and Labor Committee last May, Anna M. Griswold, Assistant Vice President for Undergraduate Education and Executive Director for Student Aid at Pennsylvania State University, said, “In summary, we believe that by entering the Direct Loan Program, we have shielded our students from the impact of turmoil in the financial markets. The state of the economy will make the availability of student aid funding even more important considerations for families in choosing a college or in determining whether they can even send their children to college in the coming years.”
Charles B. Reed, Chancellor of the California State University, testified that the Direct Loan program has several advantages. He highlighted the single point of contact for schools, student, and parent borrowers, which is easier for schools to administer, easier for staff to deal with students and offer better customer service. Mr. Reed also said that schools do not have to deal with multiple lenders, servicers, and guarantors and that eliminates inconsistencies between lenders and lender response times to students. Additionally the Direct Lending program offers standard borrower benefits. California State University has found a faster origination and disbursement under the Direct Loan program as compared to FFEL program.
CLAIM: “Focusing on the needs of students and taxpayers—rather than an ideological conviction that government always knows and does best—would be a good place to start.”
FACT: We agree it is important to focus on the needs of students and taxpayers, which is why it’s unfortunate that what’s missing from the Journal’s editorial is the perspective of students. The piece spends a lot of time talking about what financial aid officers think, but does not include a single mention of what the actual students paying for college want.
In fact, students across the country are the strongest supporters of the Student Aid and Fiscal Responsibility Act, for good reason. The bill will make student loan programs work in their best interest and will invest the bill’s savings in making college affordable and helping more Americans graduate, while providing reliable, affordable, high-quality Federal student loans for all families. It will prepare students and workers for 21st century jobs by providing all Americans with the skills and resources they need to compete and will ensure that the next generation of children enter kindergarten with the skills they need to succeed in school. Finally, it will meet Pay-As-You-Go fiscally responsible principles and reduce the deficit.
The Student Aid and Fiscal Responsibility Act will finally put the needs of students and taxpayers before lenders and financial aid officers, who have benefitted from cozy relationships and conflicts of interest in recent years. If we’re serious about doing what’s best for students, it’s time to make sure their voices are part of the conversation.
