Nelson-Burr Amendment: The Sensible Alternative

Washington D.C., August 17, 2007—The U.S. Senate this week may vote on a bill that, from a distance, might seem to be a win-win for American families struggling to pay for college. 

The truth is that millions of middle-class families would be hurt unnecessarily.  For them the cost of loans – and, therefore, the cost of college – would increase.  Moreover, families’ loan options may shrink significantly, as deep cuts force many lenders out of the program.  In fact, these cuts could threaten the viability of the federal guaranteed student loan program (more formally, the Federal Family Education Loan Program or FFELP), a program created 42 years ago by President Johnson that has helped 50 million Americans go to college.  

Senators Ben Nelson (D-NE) and Richard Burr (R-NC) have offered a better solution – a bipartisan amendment that would make college more affordable, while preserving choice and competition in federal student loans.  It is a sensible alternative.

The Senate budget package includes $18 billion in cuts to FFELP.  These cuts would have significant, harmful and unnecessary consequences, as follows:

• Raise the cost of loans for millions of students and their families.  The cuts would make student loans uneconomical for even lenders with large economies of scale.  Many lenders would be forced to reduce or eliminate discounts on rates and fees.

• Damage the ability of loan providers to offer exceptional products designed to lower default rates, improve customer service and implement technological advances.  Because of FFELP’s lower default rates, taxpayers will save $420 million from 2007 loans alone.

• Eliminate much of the competition among private lenders by driving smaller lenders out of the marketplace altogether.

Support the Bipartisan Nelson-Burr Amendment 

• The Nelson-Burr Amendment bridges the desires of those who, on the one hand, support an increase in need-based aid for low-income families and, on the other hand, want to avoid increasing loan costs for families and doing irreparable, significant harm to FFELP.

• The amendment does not eliminate major cuts to lenders – it reduces them to a level that would permit lenders to continue to offer borrowers some level of price discounts and high quality service.

• It seeks to preserve a strong private sector-based loan program that offers students and parents the choice of private lenders that compete to offer federal student loans.

• The amendment allows for a much-needed Pell Grant increase that would make college more affordable.

For more information, please contact Kevin Bruns at 202.721.1190 or kevin@aslp.info.  

###

America’s Student Loan Providers represents 89 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.