WASHINGTON, Aug. 2 /PRNewswire-USNewswire/ -- More than three dozen
organizations today released an open letter to Congress, warning of the
serious consequences of the proposed $18 billion in budget cuts to the
Federal Family Education Loan Program. A conference agreement on the House
and Senate budget reconciliation packages may come to the floor as early as
this week.
The letter in its entirety follows:
Student Loan Community Urges Congress to Protect Families from Higher Loan
Costs and Preserve the Federal Family Education Loan Program
August 2, 2007
The Federal Family Education Loan Program (FFELP) is the nation's
largest and one of its most critical financial aid programs. It serves 8
out of 10 student borrowers and 8 out of 10 schools-specifically, 6.5
million borrowers and 5,000 colleges, universities and technical schools.
In 17 states more than 90 percent of schools participate in FFELP. Since
1965 it has helped more than 50 million Americans pay for postsecondary
education.
Pending before Congress is the largest proposed spending cut in the
history of FFELP. If enacted, a minimum of 70 percent of the government's
projected support for the program between now and 2012 would be eliminated.
No federal program of this size has ever been de-funded to such an
extent and in such haste. Make no mistake: the risk of major disruptions
and dislocation in federal student loans would be significant. The impact
on the millions of families that rely on guaranteed loans to pay for
college would be immediate and direct:
-- Loan costs for families would increase, and college would become less
affordable, as loan providers reduce the discounts they offer on
interest rates and upfront fees.
-- Major disruptions could occur in service as lenders, many with
longstanding relationships with borrowers and schools, stop offering
student loans-the exodus of small lenders could be substantial.
-- The choice and competition that has generated millions of dollars in
consumer savings and convenience would be reduced-indeed, two-thirds of
registered voters recently polled said families should have a choice of
private lenders that compete to offer federal student loans.
-- New investment and innovations in loan delivery and customer service
would decline.
Taxpayers, too, would lose. Debt management and default prevention
programs that go well beyond the federal requirements, preventing an
estimated $13 billion in defaults annually, would be compromised. More
important, successful programs to keep loans in good standing protect
borrowers from the life-changing, negative consequences of default.
More broadly, these proposals are likely to increase loan volume of the
government-run Direct Loan program, which would increase the federal debt.
New Analyses Show That Cuts Go Too Far
Recent independent analyses by the Congressional Research Service and
other experts confirm the severity of the proposed $18 billion in cuts to
FFELP. For example, Mark Kantrowitz, a respected independent authority on
financial aid and publisher of FinAid.org, draws clear and unambiguous
conclusions: "The proposed subsidy cuts, especially those passed by the
House, represent a severe cut in profits for education lenders. The cuts
are severe enough that they may leave many smaller lenders unprofitable."
[Emphasis added; http://www.finaid.org/educators/2007subsidycuts.txt]
More to the point, these cuts threaten the viability of the unique
public-private partnership that is FFELP.
By making lender participation in FFELP economically unsound, these
cuts raise a fundamental issue: Does the nation want a strong private
sector-based federal student-loan program? When Congress votes on the
proposed budget cuts later this summer, that's the real question it will be
voting on.
When President Johnson signed the Higher Education Act into law in
1965, the goal was to increase access for a much broader array of Americans
by providing a small measure of federal support to those who agreed to
provide loans to students who have no credit history, income or cosigner.
Cuts that don't allow a reasonable return for the wide range of services
provided to the public by lenders are wholly incompatible with that goal.
Millions of students and parents would be left with few options and forced
to use a bureaucratic government-run Direct Loan program that has failed to
serve borrowers adequately in the past and, moreover, denies them any
lender choice and the benefits of competition that follow.
In addition, the proposed auctions in the House and Senate bills are
deeply flawed and require further study. The legislation would impose
unworkable, untried auction systems on parent borrowers and schools. The
ultimate consumers-parent borrowers-could be excluded from the process
entirely. The central focus of these proposals would be to produce the
lowest bidder, not necessarily the best qualified and most reliable. It is
worth noting that not a single congressional hearing has been held on them.
We therefore urge Congress to listen to the warnings of a broad, bipartisan
group of House lawmakers who have called for caution and meaningful study
before the student loan program is completely restructured.
An opportunity remains for Congress to reconsider the severity of the
cuts. Their impact is more clearly understood now that independent
authorities have weighed in. The law of unintended consequences would apply
if their findings are ignored. Such major structural changes to a program
as successful and important as FFELP in enabling millions of students to
pursue postsecondary education warrant Congress's most careful
consideration. We respectfully urge Congress to consider the likely effects
of these dramatic cuts and unwise auction proposals on students, parents,
schools and taxpayers.
America's Student Loan Louisiana Education Loan
Providers Authority
American Education Services/ Missouri Higher Education Loan
Pennsylvania Higher Authority
Education Assistance Agency Montana Higher Education Student
Arkansas Student Loan Assistance Corporation
Authority National Council of Higher
Bank of America Education Loan Programs
College Advance, LLC New Hampshire Higher Education
College Loan Corporation Assistance Foundation & New
College Loans Direct, Inc. Hampshire Higher Education Loan
CollegeInvest Corporation
College Parents of America NelNet, Inc.
Consumer Bankers Association Oklahoma Guaranteed Student Loan
Edfinancial Services, LLC & Program
Edamerica, Inc. Oklahoma Student Loan Authority
Education Assistance OneSimpleLoan
Corporation PNC Bank
Educational Funding of the Progressive Financial Services,
South, Inc. (Edsouth) Inc.
Finance Authority of Maine Sallie Mae
Finansure Student Loans ScholarPoint Financial, Inc.
Great Lakes Higher Education Student Assistance Foundation
Corporation & Affiliates Student Loans of North Dakota &
Higher Education Servicing Bank of North Dakota
Corporation SunTrust Bank
ISM Education Loans, Inc. The Student Loan Processors, Inc.
JPMorgan Chase USA Funds
Kentucky Higher Education Utah Higher Education Assistance
Assistance Authority & Authority
Kentucky Higher Education V-Tek Systems Corporation
Student Loan Corporation Wachovia Bank
(The Student Loan People) Wells Fargo
Wyoming Student Loan Corporation
SOURCE ASLP
 back to top
Related links:
http://www.finaid.org/educators/2007subsidycuts.txt
CONTACT:
Kevin Bruns of ASLP, +1-202-721-1190,
Kevin@aslp.info
|
