The Federal Direct Loan Program (FDLP) was initiated in 1993. The program offers subsidized Stafford loans to students and PLUS loans to parents. Eleven percent of the eligible colleges and universities participate in the FDLP.

Five states (AK, MT, NM, ND and VT) have no colleges or universities that participate in the program. Not one single participant! Five states (HI, ME, SD, UT and WY) have only one institution that participates in the program. Only six percent of all institutions in the United States choose to participate in both programs.

Further, more than 600 institutions who have left the FDLP and returned to the FFELP shed some light on why they no longer participate in the Federal program.

• 86 percent said the FFELP is a better program.
• 75 percent said the FFELP better meets their institutions’ needs
• 60 percent said the FFELP has no drawbacks.
• The majority of respondents said the FFELP was more responsive, easier to manage and more financially competitive than the FDLP.
• Respondents valued the FFELP’s customer service, borrower benefits, technology and reconciliation assistance.

So, 20 percent of all states have no or minimal participation in a program, and more than 600 institutions – who at one time used the FDLP – left it because it was not as good as the FFELP; didn’t meet the needs of their institution; was less responsive; harder to manage; less financially competitive than the FFELP; and didn’t provide as much value in terms of customer service and borrower benefits.

Why do more than 80 percent of all educational institutions in this country choose NOT to do business with the FDLP? And what benefit could come from forcing those schools – especially those that voted with their feet – to participate in a program that they’ve already concluded has no benefit for their institution or for their students? What’s wrong with the FDLP?

When it comes to funding for education, the track record for the Federal government is equally unimpressive. The government has established a 10-year track record of reducing and eliminating federal student loans. The percentage of federal student loans, as a percentage of the total amount of financial aid, dropped from 52 percent in 1995-96 to 45 percent in 2005-06. In 10 years, the government stepped away from the plate, forcing students to look for more work-study, federal grants, state grants, private grants and non-federal loans.

In the past nine years for which records are available, the percentage of student loans the government was willing to subsidize dropped dramatically, from 54 percent to 34 percent, at a time when more students than ever were looking for funding for college. Where did those students turn? They went to private lenders. The growth in unsubsidized federal student loans – those provided by private lenders - increased by 158 percent in roughly the same time period. Students turned to the stability of private lenders to make up for the waning commitment to education displayed by the Federal government.

Now, the Federal government proposes to step in again. As a student, I would be worried about how long it would take for the Federal government to step back out. Budget cuts, a sustained economic downturn, and the shifting priorities of the Federal government all leave student loan money vulnerable to cutbacks. When a student commits to four years of education, his or her finances need to be stable. The Federal government has proven that it lacks the ability to commit to educational funding in the face of competing priorities.

On the other hand, private lenders have always been there. They’ve stepped up to the plate every time the Federal government has walked away. Private lenders are in a much better position to maintain and increase the funds available for education because they don’t have competing priorities. The borrower is the lender’s top priority.

The FDLP can never make the student its top priority because the program is a hostage to the whims of Congress. The FFELP is its own master. It has one goal, one function: provide educational funding as efficiently and inexpensively as possible for as many people who need it. The FDLP can NEVER duplicate that.

Please, take one minute to call or write your senator and your representative. Tell them in no uncertain terms that you do want to ensure the long-term availability of college funding for all Americans and the best way to do that is to preserve the FFELP. Please act now.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.