WASHINGTON, DC May 23, 2007—The following statement was released by Kevin Bruns, Executive Director of America’s Student Loan Providers, in response to a May 20 editorial published by The Washington Post, entitled “Belated Insight”:
“Last Sunday, The Washington Post once again called on Congress to abolish one of the cornerstones of President Lyndon Johnson’s Great Society program. Since 1965 federal guaranteed student loans have helped 50 million Americans go to college.
“Today it serves 6.5 million students at 5,000 schools, as well as half a million parents, and makes $53 billion in new loans annually. Guaranteed student loans are the lowest-cost student loans available anywhere, largely because lenders compete on price and service.
“The Post’s position flies in the face of the facts, common sense and public opinion.
“As support, the editorial cites the Office of Management and Budget and the Congressional Budget Office. It states that OMB and CBO have concluded that the government's direct loan program 'can do the same job' at a smaller cost to the federal treasury.
“Neither OMB nor CBO has ever said that the direct loan program can do ‘the same job’ as loan providers. ‘Same job’ must mean the delivery of $53 billion in new loans and servicing of more than $250 billion in outstanding loans. It also means achieving the same lifetime default rates as guaranteed loan providers.
“In fact, the Post radically overestimates the ability of the federal government to efficiently and effectively provide student loans. It would have a small government program serving 1,000 schools and lending $14 billion annually take over the entire $67 billion federal loan program serving 6,000 schools and 8.5 million borrowers. And running the program is the same agency that the Post excoriates for incompetence and corruption.
“This small agency within just a few years would be responsible for $300 billion in outstanding loans.
“Virtually all of which would have to be borrowed by the U.S. Treasury and added to the national debt.
“If guaranteed loans were abolished, the department would have to grow even bigger to handle the quadrupling of the program’s size and responsibilities.
“The Post either misreads or ignores the public on this issue. The federal guaranteed loan program gives students and parents a choice of lenders who compete on price and service. This competition has helped make college more affordable.
“The Post would take away this choice and competition. It would require all students in the nation to borrow directly from the government.
“Two-thirds of registered voters in a recent national poll said that college students and their families should have a choice of private lenders who compete to offer federal student loans, rather than be required to borrow directly from the federal government (23 percent). [Public Opinion Strategies, April 17-19, 2007; MOE = ± 3.5%]
“From 20,000 feet, the two loan programs may appear to do the same job.
“People don’t live at 20,000 feet, however; they live where the differences in cost, quality and service matter in their everyday lives. And for the majority of the American people, that requires choice and competition.”
America’s Student Loan Providers represents 87 of the nation’s leading private, nonprofit and state-based education and financial organizations that provide guaranteed student loans through the Federal Family Education Loan (FFEL) Program. By leveraging private financial markets and competing for the right to lend to students, ASLP members offer low-cost loans to millions of students and superior levels of service to most of the approximately 5,000 postsecondary institutions that participate in the FFEL program. More information is available at www.aslp.us or call 202.721.1190.