Hollywood filmmakers exploit a theater patron’s good nature whenever the moviegoer sits down to watch a film. The moviegoer gives the filmmaker the benefit of the doubt, and in return, the filmmaker tells a good story. Filmmakers call this phenomenon the “suspension of disbelief.” Movie watchers “forgive” an unlikely storyline to give the filmmaker a chance to win over the audience.

In some ways, the FFELP gives lenders the same chance to “suspend their disbelief” for a person with no job, little money, no savings, no assets and no credit who seems “unlikely” to pay back a large debt. Instead of a good story, the FFELP lender ends up with a good, well-educated, responsible customer who repays his debts, and at the same time, makes it possible for the lender to offer the same opportunity to a new borrower.

Congressional Democrats have other plans, though. Drastic changes to the FFELP, like those proposed by the College Student Relief Act and the STAR Amendment will force honest participating FFELP lenders out of the program. That’s just the plain, unvarnished truth. Banks, credit unions, and other private lenders who are now willing to lend money to unqualified applicants because the Federal government offers its guarantee, won’t continue to grant credit to people who wouldn’t normally qualify…like students. That’s the reality of lending. Lenders offer loans to people who can show that they have the means to pay back the money. People with no job, little money, no savings, no assets and no credit need not apply. Welcome to the real world, kids.

Now, that doesn’t mean there won’t be private lenders willing to make loans. It just means that lenders will apply different borrowing policies to student applicants. After all, students will be “high-risk” borrowers. Lending institutions often charge higher interest rates to riskier borrowers. The legislation opens the door for unscrupulous and predatory lenders, who will fill in the “gaps” left by honest lenders who have been forced out of the program. Student borrowers should plan on high interest rates, risky and uncontrollable loan terms, a higher probability of default and damaged credit if they can’t start making payments immediately on student loans. There won’t be any forbearance, or delay of payment while students are in school. There won’t be any grace period after college while borrowers find jobs and get themselves established. This is the grim reality that awaits students who are desperate for money to pay for college, and choose to take their chances with these risky loans.

If you want reliability, stability, and loan terms that are appropriate to your ability to pay your loans, call or write your representatives in Washington, DC right away. Tell them that you value the stability and reliability the current FFELP provides.

You can make a difference
Call your Senators
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Sign the petition and
Tell your friends the truth about the proposed student loan legislation