In the past few weeks, hundreds, - perhaps thousands – of people employed by student loan lenders have been laid off after the passage of this new legislation. The lenders are acutely aware of the fact that this legislation will forever change the way students pay for college, and most of the lenders understand that they can no longer be part of the program.

I’m not talking about the mega-lenders, although they will also be affected. I’m talking about the thousands of small lenders who brought innovations, creative lending packages and earnest competition to the student loan lending industry. I’m talking about the local lenders, the non-profit loan lenders and servicers, the private companies who developed programs to help student borrowers avoid default, build good credit ratings and manage their finances responsibly.

There are more than 3,500 FFELP lenders in this country. If each of those lenders laid off only three people, that’s still a better than 10,000-job loss. And for what benefit?

The Congressional Research Service estimated that very few students would actually benefit from these drastic changes to the student loan program. The interest rate cuts, even at 50 percent, will save the average student $18 per month. The average annual increase to the Pell Grants is only a couple hundred dollars and most students don’t qualify for Pell Grants in the first place. This ridiculous “relief” is supposed to benefit students? Come one! Do the people in Washington understand that a single college text book can cost more than $150, let alone the annual double-digit and near double-digit increases in tuition? What is $200 per year supposed to do?

What happens when that $11.4 billion has to stretch across more students? Congress hasn’t done anyone any favors with this measure. Remember that in the 2008, 2010 and 2012 elections. The cost of higher education is spiraling out of control. There’s no end in sight and despite the best intentions of people who really want what’s best for students, many students will be closed out of our institutions of higher learning. Congress has done nothing to curb the tuition increases that our colleges and universities are passing on to students.

Congress is offering water to students who are drowning in the costs of higher education. Killing the FFELP won’t solve the problems students face. It won’t lessen the burden of paying for higher education. It won’t even make a dent. The mechanisms that students use to pay for college aren’t the problem, and they never have been. The grossly high cost of tuition is the problem. It has always been the problem and it will always be the problem until someone does something to stop the tuition increases.

The FFELP student loan program was a good deal for borrowers and taxpayers alike. It allowed millions of American families to pay for the cost of a college education with affordable student loans. The program has been well run over the past forty-two years, which is what makes the Congressional Democrats’ actions so incredible.

Since the program’s inception, the college graduation rate has tripled, and many people who would not have gone to college got the opportunity to pursue their dreams. The value of a college education is indisputable. People who graduate from college make more money than people who don’t. It’s just that simple. We’re not talking about a few bucks, either. We’re talking, on average, of $1.2 million more in lifetime earnings for college graduates than for those who don’t go to college.

That $1.2 million is income on which taxes are paid. It’s income that people use to buy houses and cars, travel, pay for their children’s education, and save for retirement. A college degree pays dividends long after the student loans that funded it have been repaid. This is especially true for students from lower- and middle-income families, for whom a college education is not a guaranteed thing.

Since the mid-60’s, the FFELP program has been in place to ensure that students made it through college and were given the chance to contribute meaningfully to society and to share in the prosperity that a college degree offered. More students than ever before are expected in our nation’s colleges and universities in the next ten years. Unfortunately, they’re not the trust-fund types that come prepared to pay out of pocket. They’re the students that President Johnson was trying to help with the FFEL program.

Congress has just issued the most striking blow to that program, and in the process, has jeopardized the educational well being of millions of American students who are not even old enough to enter college yet. The opportunity for those students to get through college has been struck down, and they don’t even realize it.

The cost of higher education is crippling and Congress has done absolutely nothing to change that. Forty-two years ago, President Johnson recognized that the cost of education was a barrier to entry. Well, the barrier still exists. Tuition rates are skyrocketing and Congress hasn’t done anything to solve the real problem. Now, Congress’ commitment to helping students overcome the barriers to entry is wavering. With more after-tax incentives to save for college, and fewer opportunities to pay for college, Congress is washing its hands of the whole question of exorbitant tuition increases. The bottom line for most American families is that if you haven’t saved enough for college, under this legislation, there’s a good chance you won’t be going.

The legislation means that you won’t be consolidating your student loans anymore. If you have outstanding student loans and you have not consolidated them, you should immediately contact your lender to see if student loan consolidation is still possible. In some cases, you may find that lenders have already stopped accepting loan consolidation applications or have set application deadlines in anticipation of the impact of this legislation. If you’re still in school or you’ve recently graduated, you may not even be eligible to consolidate your student loans. In many cases, your student loans must be in repayment before you can consolidate. If your grace period has not expired, you may be out of luck. Thank a Democrat for that.

This legislation jeopardizes the sale of Sallie Mae, the largest student loan lender in the industry. The company is in the middle of a sale to a private equity firm, and the sale was originally to conclude in October. What this means for you, the taxpayer, is that suddenly, Sallie Mae isn’t so attractive anymore. Since the Federal government backs Sallie Mae’s loans, you could be picking up the bill for some of Sallie Mae’s lending, if things don’t work out right.

This legislation reduces the amount of money the Feds spend on debt collection. This is a bad sign. The Feds already have a high default rate in their own program, - it currently approaches 25 percent. We have recently seen stories of the amount of money the Canadian government spends to collect on defaulted student loans for their government-run student loan program. It exceeds the amount of money that program makes on the interest. By decreasing the funds available for collection activities, the Congressional Democrats are throwing in the towel before the plan even starts moving. They’re willing to “accept” the costs of writing off a certain amount of default debt. That’s easy for them to do; they’re not losing their money. They’re losing yours! Instead of being diligent with your money, as the FFELP lenders have been, they’re throwing it away. That’s typical of Congress and you should expect more of the same in the coming years.

The legislation is unstable and it provides an interest rate cut for just four years. The next re-authorization will take place as the country is beginning to gear up for the next election cycle. This approach isn’t doing the taxpayers or student loan borrowers any favors. Congressional Democrats have layered into the program a structural instability that guarantees change every four years. If Congress is sleeping, which is entirely possible, as we’ve seen in the past, your interest rates could shoot up unexpectedly.

On the other hand, experts agree that low interest rates, which don’t really address the issue of the cost of higher education, aren’t really the best mechanism to reducing the cost of a college education. Four years from now, you could get stuck with another round of policy failure based on low interest rates on student loans, when that strategy does nothing positive in the long-term.

The student loan legislation we were worried about has passed. The $18 billion in subsidies cuts has turned into $20 billion. Unlike what the Congressional Democrats promised, only $11.4 billion will go to increased Pell Grants for students. You might be wondering about the other $8.6 billion. Some of it will be redirected to deficit reduction – which isn’t the student aid the Congressional Democrats promised.

The interest rate cut is halved, but it’s only good for (surprise!) four years. You get to go through this garbage again during the next Presidential election. The Democrats have thoroughly politicized the student loan process, so you can count on this kind of instability for future election cycles.

The system of auctions has been foisted upon your parents. They’re the ones who get to collect lenders instead of you. Maybe Senator Kennedy should print up lender trading cards to help your folks keep track of the Lender du Jour.

Lender loan origination fees, which had been 0.5% are doubling. Those are the origination fees that many lenders used to waive. Well, start your wallets, kids, because they’re going up, and you’re going to be paying for them. This is exactly what I’ve predicted. The Feds will be shoving off all of their administrative costs to you, the borrower. Going to college is going to be much more expensive from now on. If you haven’t prepared well, Senator Kennedy’s “subsidies cut” is going to come as a rude surprise. He’s not cutting the lenders’ subsidies. He’s cutting yours.

This kind of legislation is irresponsible. The Congressional Democrats used a bazooka to swat a fly. No one is saying that the student loan industry could have used reform. What industry can’t? But there were many mechanisms available to solve the real problems without resorting to the near-complete devastation of the entire industry.

In the end, it’s you, the borrower and you, the taxpayer who will be held responsible for the Congressional Democrats’ mistakes. Prepare yourselves for the next four years because it’s going to be a rough ride. Remember this as you work your way through this system, and don’t forget to vote in 2012.

On a lot of levels, things don’t look so good with this student loan legislation. First, Democrats are just now figuring out that they can’t deliver what they promised. They’re hoping that you – the voter – don’t notice that you – the borrower – aren’t going to get what they promised.

Things don’t look so good for you the borrower, because thee Congressional Democrats want to cut about $20 billion in student loan subsidies to FFELP lenders. This isn’t the $20 billion that lines the pockets of dishonest and greedy FFELP lenders. This is the $20 billion that pays for your student loan origination fee waivers, your interest rate cuts, your incentives for on-time payment histories, your competitive interest rate cuts, your borrower education and default avoidance programs and all of the other “amenities” the FFELP lenders provide to borrowers. You won’t be getting those from the FDLP program. Those will be coming out of your pocket.

Don’t think for a minute that this legislation won’t affect you. It will. You, the taxpayer, can’t escape the impact of a Federal program cut of 75 percent or more, especially when the government wants to continue the program without paying for it. You will be expected to pay for your student loan twice – once through direct repayment of the money you borrowed, and again to repay the money the Feds borrowed to lend to you in the first place. How is that fair and equitable? It’s not!

Things don’t look so good for the FFELP lenders who have participated in the program for years. Everything you thought you knew about student loans will change. The rules will be very different than what you thought you were going to have and you won’t always be able to rely on student loans to help you through college.

Things don’t look so good for your parents, who may have planned to borrow funds to get you through college. They’re going to be stuck with the same mess you are. They’ll pay for your loans twice … maybe three times. Once, when they borrow for your education’ a second time as their tax dollars go to work paying off the money the Feds borrowed to lend to them for your benefits, and a third time, if they also borrow against their retirement savings to pay for your education. They may have to delay their retirement plans while at the same time, they’ll risk losing their retirement funds altogether if something unfortunate happens to one of them before they can get your student loans repaid.

As I said, things don’t look so good.

In case you missed it, Nancy Pelosi is now confronting the reality that the Congressional Democrats may have promised too much in the way of interest rate cuts for student loan borrowers. It seems as though the proposed interest rate cut of 50% will jeopardize the sale of Sallie Mae, the largest student loan lender in the US.

Why should Congress care about that? Well, the Feds back Sallie Mae’s student loans. If the sale doesn’t go through, or something really unfortunate happens to Sallie Mae, or the new buyer can’t make ends meet as the result of Congress’ new and improved interest rates, the Feds are going to be on the hook for all of Sallie Mae’s student loans.

As it turns out, student loan lending doesn’t really have the fat profit margins in it that the Democrats have been screaming about. In truth, the margins are pretty thin. Thin enough that a 50% interest rate reduction would make student loan lenders like Sallie Mae unattractive, or worse, unable to stay in the business of student loan lending.

This is a classic example of the Congressional Democrats’ uncanny ability to act before they have all of the facts. The 50% rate cut isn’t possible without bringing down the entire student loan lending industry and costing the government billions of dollars. The bottom line for all of you student borrowers out there is that there’s no way for Pelosi and Co., to come out ahead on the interest rate cut, so the Congressional Two-Step begins. It’s interesting to watch how try to they extract themselves from the undeliverable promises they made to you, the students.

In the end, they’ll hold the interest rates constant. You won’t get a rate cut at all. Congress doesn’t really care about the interest rate on student loans, and you? Well, you’ll get over it, right? After all, what’s a broken promise or two between a Congressional Representative and his or her constituents? What Congress is really after is the subsidies they pay to FFELP lenders right now.

If you follow the money, you’ll find that the subsidies that Congress pays to the FFELP lenders don’t go toward those lenders’ bottom lines. They go to you, the borrowers. They pay for loan origination fees, interest rate cuts, debt forgiveness, and education programs designed to help you. Sure, the student loan lenders could pocket the money, but they don’t. Why? Because they understand that the long-term viability of the program depends on them being responsible stewards of the government’s money; distributing the benefits to students; and engaging in healthy competition that benefits the borrower, the lender, and society in general.

When Congress proposes to cut the subsidies they pay to FFELP lenders, they’re really proposing to cut the subsidies the student loan lenders pass along to you. You’re the one who loses in this deal.

The Congressional Democrats complain about colleges and universities that maintain so-called “preferred lender lists.” Their complaint is that the preferred lender list may mislead students about the companies from whom they can borrow. Congress wants students to know that students can borrow from any participating lender, not just those on a school’s preferred lender list.

It’s ironic, really. The only federally funded student loan program in which students don’t have a choice of lender is the FDLP. Yes, that’s right. FDLP participants don’t have a choice of lender. Congress wants to put all student borrowers into the FDLP, thereby eliminating choice from student loan lending altogether. Congress complains that students may not be fully aware of their lending choices in the FFELP, and yet, choice is exactly what gets extinguished under the Congressional Democrats’ plan.

Why is lending choice so important? When students choose among many lenders, they strengthen the FFEL program. If a borrower can choose among lenders, the borrower can go anywhere. If one lender offers a better deal, fewer fees, or better interest rates, the borrower wins. On the other hand, when choice is stifled and competition is eliminated, borrowers have no choice and cannot find the terms that best meet their needs. Lenders don’t need to compete, so they can impose whatever terms they like. Without competition, borrowers lose.

The government wants to force borrowers into programs that are designed to turn student loans into losing propositions. The borrower loses. The lender loses. The universities and colleges lose. Millions of middle class American families lose. The country loses.

Why does Congress want to switch successful student loan lending programs into loser mode? Congress doesn’t really want to back your student loans anymore, and it’s easier to cut support for higher education funding when Congress has more control over the program. Student financial aid comprises a large chunk of the Federal government’s budget each year. Without meaningful cost controls on the rise in tuition, the only thing Congress can control is what portion of your education they subsidize.

Congress wants to send a message to American families, which is “Don’t look to us for help with college funding anymore.” Unfortunately, it will take years for American families to prepare to cover the outrageous cost of higher education. In the mean time, they’re using current college students as political pawns by promising lower interest rates and other “benefits” they have no intention to deliver.

Analysts have been watching the Illinois Student Assistance Commission lately. It recently sold about $1.4 billion in student loans, about half of the loans it had been holding. The agency was also looking to shop another $1 billion in its remaining portfolio. The agency sold an additional $629 million in loans in January.

What’s with the sale of all of these student loans? It seems that the state government in Illinois found it burdensome to service all of these student loans. It’s become too risky for the state to continue to hold these loans, so off they go. (Risk, in this case, has as much to do with the upcoming election cycle as it does with the general state of the economy.) This is another great illustration of why governments should not be in the business of lending. Their tolerance for risk is low, and what they perceive as risk is colored by which way the political winds are blowing.

That really has no place in professional lending. Lending should be left to lenders. Lenders understand the risks when they make the loans, and understand how to help borrowers perform according to the loan terms. FFELP lenders have worked with their borrowers and with the colleges and universities to develop programs that mitigate the risk. In mitigating risk, the FFELP lenders can make loans to “risky” borrowers. The FFELP’s programs transform “risky” loans into performing loans by working to eliminate the causes of default. Government lenders simply run and hide, or take the loss and pass the costs back to the taxpayers.

So the ISAC sells most of its loan portfolios, and destabilizes the services it has provided to student borrowers. It minimizes the services it can offer to the borrowers in its remaining portfolio. To make matters worse, the student loans sold by ISAC were sold at a much smaller premium than the initial sales in January.

The overall effect for the borrowers is that they now deal with a new loan servicer – one they’ve probably never heard of. The companies that purchased the loans are probably OK to deal with, but if they aren’t, at least the borrower has options, right? Maybe not. Under the old rules, these borrowers would have the opportunity to move their student loans to a servicer of their choice by consolidating their loans with a different lender. Student loan consolidations are going to be pretty hard to come by, and lenders will have little or no incentive to assist students who are looking to consolidate student loans.

This kind of instability is exactly why governmental agencies should be in the lending business. No matter where their heart is, they aren’t lenders. They’re subject to political machinations that can change on a daily basis. Borrowers need stability. Tell your Congressional Representatives that you don’t want the student loan system dismantled. You want stability in lending and loan servicing, such as what you get with FFELP lenders.

Among the big successes of the FFELP is the low default rate of student borrowers. Low default rates don’t just happen. The FFELP lenders have had to work very diligently to develop programs that help student borrowers understand the importance of paying back the student loans they’ve taken.

Because FFELP loans are backed by the Federal government, the Federal government ultimately must make good on the student loans that students fail to repay. In that light, why should the FFELP lenders care whether a student defaults on their student loans or not? After all, they get paid regardless of whether the borrower performs or not, right?

The FFELP lenders care because repayment is part of lending, and lending is what they do. FFELP lenders don’t want to return a bunch of bad debt to the government. If they did, the government would no longer agree to back their student loans. The FFELP lenders, therefore, work very hard to make sure the loans they write get repaid when the time comes.

FFELP lenders provide an extremely valuable service, by helping students understand the consequences of default, strategies for avoiding default, and options when they need additional forbearance, a longer repayment period, a smaller monthly payment, student loan consolidations, a better interest rate, and in some cases, outright debt forgiveness.

All of these educational programs will fall by the wayside under the new student loan rules. Default rates in the FDLP hover around 25 percent, compared to a 5 percent default rate on FFELP loans. The Feds will eat the non-performing student loans and pass the cost back to the taxpayer. Unlike the FFELP programs, which save the Federal government (and ultimately you, the taxpayer) money by preventing default, the Federal program will just “absorb” the loss. There’s no absorption, unless the Feds are talking about the money they “absorb” from your wallets. There’s a direct cost to taxpayers when a student borrower defaults on a student loan.

Would you rather work with a lender who is successful in reducing default rates, or are you OK with the government’s approach of handing the loss off to the taxpayer? Tell your Representatives and Senators in Congress that don’t want to foot the bill for the Feds’ poor management of its student loan portfolio. Tell them that if they can’t reform the FDLP to produce the same low 5-percent default rate on loans, that they should leave the business of lending to the professionals.

A recent study conducted by the National Association of Student Financial Aid Administrators shows that college graduates stand to make over a million dollars more than non-graduates do throughout their working career. The investments students make in their degrees are worth it, even with the higher cost of going to college.

Congress’ new plan to fund higher education is going to change all of that. It’s not clear that the new plan is adequately funded to accommodate the expected increase of students in the next ten years. The program that Congress is pushing is already in the hole by more than $16 billion and is hemorrhaging money right and left.

The funding for student loans is not guaranteed. Congress can re-allocate that money any time it chooses to and for any reason, with or without notice. If the funding priorities change in Washington, millions of American college students could kiss their funding goodbye.

Worse, the new program eliminates most current lenders, and makes staying in the program so unattractive that even those lenders that can afford to stay in the program will choose not to. Congress is under funding student financial aid, and has been doing so for many years. Under the new program, they’ll also be cutting off the option that many students have turned to in order to compensate for Congress’ reduced commitment to funding student financial aid.

Make no mistake about it. You will have far fewer options to fund a college education, thanks to this new legislation. The mechanism that you thought you could count on is going to be taken away. In the process, Congress has jeopardized the future of many promising students, and will consign many of them to lives of poverty and struggle.

When higher education isn’t available to most prospective students because they lack a credible funding mechanism to finance their goals, you’ll have Senator Kennedy and the Congressional Democrats to thank. Just remember, they don’t care about how you’re planning to get through college, or whether you have enough funding. If they did, they wouldn’t have let the Federal financial aid caps rot in place for so long.

Tell your representatives in Congress that you want stable, equitable and accessible funding for higher education, like that which is available through the FFELP lenders.

Many features of FFELP student loans that borrowers take for granted have been wiped out by the new legislation. Federal student loan consolidation is a major benefit that borrowers now enjoy. Under the new plan, students will be required to borrow from a few prescribed lenders.

Wasn’t one of the government’s complaints that colleges and universities were using “preferred lender” lists? Isn’t it ironic that the government’s solution to preferred lender lists is … surprise… pre-determined lenders that students must work with to receive their student loans! Huh? Instead of creating a mechanism that improves competition, Congress, in its wisdom, has decided to create the ultimate “preferred lender list.” If you’re lucky, your state will have two such lenders. If not, you could have one or none. Don’t worry; the Feds will assign a lender for you. How’s that for choice?

Most FFELP lenders will be eliminated from the program, or will opt not to participate in Senator Kennedy’s as-yet-to-be-determined auction. This isn’t an ordinary auction, because the Feds have already rigged the bids. The auction participants are supposed to compete with each other by “bidding” on the lowest compensation they’re willing to accept.

For a group of lenders that have supplied student loan funding for the last forty years, and who have enabled 50 million Americans to realize their higher education goals, this is a real kick in the teeth. Congress is looking for a quick fix – not for the problems in the student loan industry – but for the perception by voters that they’re too incompetent to get anything done. To change that perception, they’re willing to carve up a perfectly workable program and substitute the FDLP mess in its place.

Don’t kid yourself into thinking that the Department of Ed is capable of running a student loan program. They already run the FDLP, and loan payments to colleges and universities have been so late that Congress has had to step in and provide emergency funding to prevent thousands of students from being disenrolled by their institutions for lack of payment.

Yes, this is what you can expect from Uncle Sam. The Department of Ed has neither the expertise nor the manpower to pull this off. Worse, they don’t possess the political clout to get things done quickly and efficiently. Unfortunately, millions of students depend on quick and efficient, which is what they receive from the FFELP lenders. Colleges and universities rely on quick and efficient to receive loan payments, which represent their operating capital.

The Feds can’t deliver either, and no one will be served by this program. Tell your representatives in Congress that you don’t want to give up the quick, efficient administration of student loan lending that you’ve come to expect from FFELP lenders.

Congress has not increased the maximum amount of Pell Grant awards since 1992. Not coincidentally, students have been turning to private student loans in large numbers to finance their educations.

The issue of private student loans is really separate from the discussion I normally conduct on this blog. Whether you approve of private loans or not, the fact is that students have turned to private lenders – FFELP and non-FFELP – because Congress did nothing to offset the rising cost of tuition for fifteen years. Now, Congress is crying foul.

What did they expect? Students just can’t stop going to college, and when they have no other credible means of funding their education, they turn to student loans. Congress precipitated this issue by not providing adequate funding for students in the first place, and they have no one to blame but themselves. It’s much more convenient, especially during an election cycle, to look for someone else to point the finger at, but the truth of the matter is that students would have been much better off had Congress re-adjusted the Pell Grant caps in 1998 or in 2004.

Congress isn’t blameless in this matter, and frankly, the entire legislative body plays a far more central role in student loan lending and Federal financial aid than they want to claim credit for. Why am I bringing this up? The speeches, finger-pointing and so-called investigations that are being conducted now are simply window-dressing for the electorate.

Congress is content to dismantle the Federal financial aid mechanism that has worked quite well for decades. Instead of asking for reforms, they’re throwing the baby out with the bathwater, and bringing chaos into the lives of college students and prospective college students everywhere.

Regardless of what the House has promised, what will be delivered is a funding mechanism that’s broken from the get-go. The new program relies on deficit spending, and I don’t care how long you try it, you can’t borrow your way out of debt. Once graduates have paid back their Federal student loans, they’ll continue to pay the debts of the new funding mechanism, which will sink under the weight of an increased number of program participants. The new Federal proposal will never work because it doesn’t address the real problem: the unchecked rise in the cost of tuition. The meat of student loan debt comes not from the interest rate, which is capped for Federal subsidized and unsubsidized student loans, but rather from the enormous sums that students must borrow to get through college.

Tell your Congressmen and Senators that you’re not interested in going through a broken funding mechanism that cannot sustain the demands of an increased number of borrowers, and the unrestricted rises in the cost of college tuition.

The Fall semester has begun at most institutions, and publications are full of sage advice to students on how to manage their student loan debts. Unfortunately this year, most of this advice is wrong. One of the subjects I’ve seen floating around lately is student loan consolidation, and how much money a consolidated loan can save. That part is accurate. Consolidated student loans can save a lot of money.

What’s wrong is the opportunity to consolidate student loans. Very shortly, students will lose the ability to consolidate student loans. No more saving money. Sorry. Be sure to send a nice thank-you note to Senator Kennedy for that. His plan effectively eliminates student loan consolidation.

Some FFELP lenders have already established cutoff dates by which borrowers must have their student loans consolidated. October 1st is the date that some lenders are throwing around as the last opportunity for consolidation. If you haven’t consolidated your student loans by that time, you’re stuck with whatever you’ve got.

If your situation changes, and you need a longer repayment period, or if the interest rate on your student loans is higher than the current market rate, after October 1, you’ll be out of luck. You’ll have to find a different way to make ends meet, because you will no longer have the option of consolidating all of your individual student loans into a single loan, with a lower rate and better repayment terms. Sorry about that, but Congress has changed the rules.

The Congressional Democrats aren’t making too much noise about taking away your ability to consolidate your student loans, which for many borrowers is a real opportunity to save money. They’re still hoping to string you along with promises of massive interest rate reductions. The truth is that the 50 percent interest rate cut isn’t going to save much money for the average borrower. The real problem isn’t the interest rate. If it were, Congress has the authority to mandate a new interest rate. They could cut your interest rate in half right now without making a single additional change to the program. They have the authority to do that and they’ve chosen not to.

Ask yourself this: if they’re so keen on providing relief to student borrowers, why are they phasing in the interest rate cut? Why not just cut interest rates in half tomorrow? The interest rate isn’t the issue. The issue is that the Feds no longer want to back your student loans. They don’t have the money to adequately fund the program and this is a last-ditch effort to help you get through college. If this doesn’t work, (or maybe I should say “When this doesn’t work…”) you’ll be on your own.

Remember: it’s not the interest rate. Tell your Congressmen and Senators that you want them to live up to the expectations President Johnson established when he created the FFELP. Tell your representatives that you want to preserve the ability to consolidate your loans under the existing FFELP program.

KCRA, in Citrus Heights, CA ran a story on its web site recently about a young woman who grew up in California’s foster care system. Her ambition was to attend college, but she needed funding from, the State of California to realize her dream. The last $5,000 of her tuition was tied up with the State budget, which had not been passed and was nearly two months late. At the last moment, the State resolved its budget issues and the woman was awarded her $5,000.

The story raises the issue, however, of the ease with which governmental authorities can toy with the availability of student aid funding. This centralized control is exactly what the Democrats have proposed, and plan to foist on the country. We’ve already seen the efficacy of the FDLP. It’s running billions of dollars in the red, and has never once broken even in its illustrious history.

What happens when student loan funding once again becomes a political football? How many students will be denied student loans, given aid packages that don’t cover their expenses, or be forced to scramble at the last minute to come up with funds that the government no longer wants to (or is able to) provide?

Student loan funding shouldn’t be left to the Federal government. Canada’s failing experiments with centralized student loan servicing should be serving as a colossal warning to those who think that the Federal government can do a better job of servicing student loans.

The FFELP lenders compete with each other because students are free to move their student loan businesses from one lender to another at any time. If a borrower does not like the customer service he’s receiving, or finds a better interest rate, the borrower can move the loan as he sees fit.

Under the new plan, that’s just not going to happen anymore, and the big losers in all of this will be the students, who will be stuck dealing with the Federal government’s student loan program. Students who have the misfortune of dealing with the Feds are in for a big surprise, especially after having dealt with professional lenders. The Federal government has no incentive to improve their loan products, loan processes, or customer service. After all, they’re the Federal government and they’re doing you a favor.

Tell your Congressional Representatives that you don’t want to be stuck in yet another non-responsive Federal program. Tell them that you would prefer to work within the current system, and preserve the competition, and the benefits of dealing with FFELP lenders.

Congress has reauthorized the Higher Education Act, which created the FFEL program, nine times since its inception in 1965. It’s interesting to note that seven of the nine reauthorizations were voted on during presidential election years. 2007 stands out because it’s not an election year. Nonetheless, we’re in the middle of an election, and the Congressional Democrats want to get as much mileage as possible out of this issue.

They want you to believe that they care about how you’re going to pay for college. They want you to know that they don’t want you to accumulate so much student loan debt. Ironically, Congress is part of the reason you have so much debt in the first place.

At each reauthorization, loan and aid caps are set. The current caps were set in 1992. Can you think of anything that costs the same now as it did in 1992? Congress reauthorized the Act in 1998 and 2004. Both times, Congress could have helped you out by increasing lifetime borrowing limits, and loan and grant caps, yet they chose not to. Do you still believe they care about how students are going to pay for college? The last fifteen years of their inaction should give you your answer.

In the best possible case, your Congressional representatives are simply inattentive to the needs of college students when it comes to Federal financial aid, and ignorant of the realities of paying for a higher education. That would explain why they capped Federal financial aid for fifteen years while the cost of tuition soared.

In the worst possible case, Congress understood that capping Federal financial aid would severely restrict the number of students who could attend college, and force them to either look for other funding sources, which Congress did not have to guarantee, or forego college altogether. You see, Congress doesn’t really want to foot the bill for you to go to college. They want to make your college education your problem.

Yes, there is a “public benefit” rationale for the Congress to help pay the cost of going to school, but Congress’ actions in the last 15 years should be a very clear signal that Congress doesn’t want to help you pay for college. They’ve spent far more time crafting college savings plans than they have spent on considering the Federal financial aid formulas. The Congressional Democrats are willing to use the issue for political gain, but once the election is done and there’s no more political capital to be had from this issue, you won’t hear a peep from Congress about financial aid funding.

Congress doesn’t want to help you pay for college. They would much rather have you and your family figure this out by yourselves. Since you have the potential to vote, however, they’ll humor you as long as they can get some political cash along the way. That’s why the Higher Education Act most often comes up for reauthorization during an election year.

Don’t fall for this snake oil that the Congressional Democrats are selling. Tell your representatives in Congress that the best way for them to support the public benefit is to continue the public-private FFELP partnership that has worked for more than 40 years.