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The U.S. Department of Education announced plans yesterday to ensure that government-backed student loans will continue to be available despite problems in the credit markets.
U.S. Rep. Tom Petri (R-WI) responded that he is pleased that, as part of her four-part plan, Secretary of Education Margaret Spellings included her department's commitment to double the capacity of the government-run Direct Loan Program.
Over the past few months, hundreds of colleges and universities have switched to the Direct Loan Program because, unlike the Family Federal Education Loan (FFEL) Program which guarantees loans made through private financial institutions, the Direct Loan Program is immune to the effects of credit market turbulence. Petri said the Direct Loan Program "continues to prove that it is the most reliable federal student loan program and a far better deal for both students and taxpayers."
Petri said he remains skeptical of the need for the federal government to provide liquidity to lenders, and is concerned that the short-term plan of ensuring liquidity in the FFEL Program by buying loans from private lenders is more generous than current conditions require. "The devil is in the details, and I will continue to monitor the arrangement to make sure it does not result in any net costs to taxpayers. Clearly, this arrangement once again highlights the need for a comprehensive, market-sensitive overhaul of the FFEL Program to ensure students' and taxpayers' interests are better served," he said.
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