Statement of America’s Student Loan Providers Regarding Higher Education Reconciliation Act of 2005
Title VIII of the Deficit Reduction Act of 2005 (S. 1932)

Washington, D.C. –Kevin Bruns, Executive Director of America’s Student Loan Providers, today issued the following statement in response to final passage of the budget reconciliation conference report:

 “From the perspective of America’s Student Loan Providers, the budget reconciliation conference report is a real mixed bag, with its large spending cuts only partly offset by much needed benefits to students.

 “No one in the higher education community can be happy with the magnitude of the student loan cuts contained in the conference report.  Regardless of how you slice and dice it, a $20.3 billion cut in federal student loans is a big hit.  A full $18.1 billion in cuts are from the Federal Family Education Loan Program (FFELP).  These cuts will have negative consequences for students, parents, schools and loan providers.

 “For the loan provider community, the final bill significantly increases the cost of defaults and loan collections and eliminates floor income, among other changes.  No one got off easy.

 “There are a few diamonds in this rough, however.  In reauthorizing the FFELP for another six years, Congress again upheld the very important principle that competition in the federal student loan program is in the best interests of students, parents and schools.  That this competition – both among FFELP loan providers as well as between the FFELP and the Federal Direct Student Loan Program – creates strong market-based incentives in the FFELP for innovation, superior service and lower cost loans.  Essentially, the Congress continues to say, ‘Let schools and students choose.’  

 “While a bill designed to reduce the deficit is really not the appropriate vehicle to make program reforms, the conference report does include approximately $9 billion in additional student and borrower benefits.  These include increased loan limits, easier loan rehabilitation rules, complete elimination of the three percent origination fee in both programs by 2010, and creation of new grants for first- and second-year undergraduate students and third- and fourth-year science and mathematics students.

 “Finally, considering FFELP‘s contribution to deficit reduction represented about a quarter of all spending cuts, the student loan community in future budget years will be fully justified in saying, ‘We already gave.’  The integrity of the FFELP and its ability to carry out its mission will be jeopardized by further budget cuts.”

America’s Student Loan Providers represents education and financial firms and organizations that provide federally guaranteed student loans through the Federal Family Education Loan Program (FFELP), a public-private partnership of schools, students, loan providers, loan guarantors, and the federal government. By leveraging private financial markets and competing for the right to lend to students, the FFELP brings value to students, schools, and taxpayers.  Students benefit through lower interest rates, and simplified loan application and approval processes. More information is available at www.aslp.us.