House Committee on Education and Labor
U.S. House of Representatives

Rep. Howard P. “Buck” McKeon
Ranking Member

Fiscally responsible reforms for students, workers and retirees.


Fact Sheet

December 16, 2009

What They’re Saying: Financial Aid Professionals & Opinion Leaders Raise Doubts About Government Takeover of Student Lending

Because of the type of software developed specifically for our current computer system, our transition process is not simply a matter of purchasing and rapidly installing an ‘off the shelf’ program. Transition to direct lending would require an investment of well over a million dollars and a timeline for implementation exceeding one year….To add the cost of converting our system to direct lending without any help would be tantamount to another budget reduction for us at this time. Ironically, this would increase costs and negate much of the positive impact of potential increases to financial aid generated by proposed policy improvements.”

Harris Pastides, President, University of South Carolina: Letter dated May 26, 2009 

“The FFELP provides benefits to students, schools, taxpayers, and the economy. Because the private sector student loan program offers schools and students a choice of lenders, the private sector competes for this business. The competition, in turn, has lowered the costs of student loans, improved service to both students and schools, and led to the investment of millions of dollars in technology to improve service and loan processing. … Many colleges may not be able to afford the monetary and time investments required for computer upgrades and training to handle the change to DL even if the schedule was not as aggressive.”

Laurie Weber, President, North Dakota Association of Financial Aid Administrators: Letter dated March 20, 2009 

Having choice and competition among FFELP and DL is best for the student, taxpayer, and society at large. … The majority of colleges and universities in our state PREFER the FFEL Program. Colleges and their students have a choice, and an impressive majority has chosen FFELP (approximately 132 of the 154 schools in Missouri).”

Jan Brandow, President, Missouri Association of Student Financial Aid Personnel: Letter from March 17, 2009 

“A clear majority of institutions, including mine, have chosen to participate in the FFEL Program because of the services and choice it provides to our students and our institution. FFEL organizations work with schools to ensure that students can receive information and counseling on how to manage their finances and successfully repay their loans to avoid the serious consequences of default. … Given the choice between the federal student loan programs, my institution has chosen the FFEL Program. Removing that choice at a time when students and families are searching for stability and assurance in their higher education financing would be a severe disruption that could have major consequences.”

Sister Marcella Marie Garus, President, Villa Maria College of Buffalo: Letter dated March 30, 2009 

“Choice and competition among student loan providers have greatly benefited colleges and universities as well as our students. Students and schools have benefited from the efficiencies developed in FFELP because loan providers have a constant incentive to be innovative and offer better services and lower rates. While FFEL and the Federal Direct Loan programs have served students effectively, please note that under FFELP, student loan providers do more than just offer student loans. In fact, most state-based student loan providers and many private lenders offer a variety of valuable college planning services.” 

John Jefferson, President Arkansas Association of Student Financial Aid Administrators and Director of Financial Aid, Southern Arkansas University Tech: Letter dated March 16, 2009 

“In this time of economic unrest, there can be no doubt about the immense value of debt management and financial literacy skills for every American. There’s never been a greater need for education debt management services—or a worse time to end the very services that have proven successful in helping student loan borrowers avoid default and maintain good credit.

John View, Director of Financial Aid and EOP, State University of New York: Letter dated April 20, 2009 

“We strongly believe that we are too close to the beginning of the 2010/2011 awarding cycle to meet our obligation to students attending our institutions based on the provisions contained in the recent House-passed Student Aid and Fiscal Responsibility Act (H.R. 3221).”

Barbara Bickett, 2009 CASFAA President: Letter dated December 7, 2009 

 “The current proposed [legislation][sic] to eliminate the FFEL program at this time and change to Direct Lending raises many concerns because of the drastic impact it could have not only on our students, but also on the way our College will do business. This will be an added constraint with our College’s budget within the course of a school year since it affects how we will serve our students, along with the financial strain of increasing our staff.

Anne Sylvain, Direction of Financial Aid, Fisher College: Letter dated December 10, 2009 

“The FFELP program is more than just a way to process a loan. These kids going to college need to be able to communicate with people who care and have the time to help them understand the process of taking and managing student loans. The government’s call centers will not give them that customer service.”

Marcie Tillett, Director of Financial Aid, Brescia University: Letter 

 “The Obama administration is trying to strong-arm America’s colleges and universities into complying with a bill that hasn’t been signed into law yet. The bill…would replace current subsidized-student-loan programs with a government-run system…Not only would the switch be bad for students and for taxpayers, it would also create logistical headaches for universities. Many financial-aid professionals have complained that the administration’s timeline is unrealistic. Colleges and universities start putting together financial-aid packages for the fall semester as early as January. ‘They’re saying it’s as simple as throwing a switch,’ Dewey Knight, associate director of financial aid for the University of Mississippi, tells NRO. ‘Well, I’m the guy throwing the switch, and I can tell you it’s not that simple.’ Knight describes the administration’s attitude as ‘an insult to people who spent years getting delivery systems in place. We didn’t just throw a switch to get where we are.’”

Stephen Spruiell, “Takeover on Campus,” National Review Online, 10.29.09

“Despite the fact that the scheme is not yet law, Department of Education officials began writing letters as early as July to college presidents about how to transition to the Direct Loan Program, as if the existing private option already were dead. … This is outrageous. It puts tacit pressure on colleges to withdraw from the private lenders regardless of what happens with the legislation. In effect, the government is bullying private lenders out of business even without benefit of law. And that comes on the heels of a report by The Washington Times of an Oct. 2 conference call between Department of Education officials and presidents of community colleges in which the officials certainly sounded as if they were asking the presidents to lobby Congress in favor of SAFRA. Political actions of this sort by executive branch officials on department time are expressly prohibited by federal law.”

Editorial, “Schoolyard bullies,” The Washington Times, 11.30.09 

“The private lenders have been the most popular choice, while—big surprise—the government's program has a history of shoddy customer service. But before the bill has even come to the Senate floor, federal officials have been making unsolicited contacts to schools urging them to accept this ‘public option.’ …Schools got the message. The leader of a large university recently refused to discuss the issue with us on the record, fearful that the feds are taking names. Rep. John Kline (R., Minn.) has asked the Department of Education's inspector general to investigate efforts by officials to encourage outside groups to advocate for the ban on private lenders. He wants to know if department staff violated a federal law against lobbying with appropriated funds, among other possible offenses.”

Editorial, “Public Option Campus Revolt,” The Wall Street Journal, 12.05.09