Congressional Democrats criticize the FFELP lenders for charging high interest rates and soaking “billions” of dollars out of the Federal government each year. This is absolutely untrue. Let’s take a look at what you – the taxpayer – get for your money through the FFELP.

First, the FFELP has provided a highly reliable program over the past 42 years. The program works virtually flawlessly and students and their families can count on it. The FFELP lenders have always been there, offering not just loans at a reduced interest rate, but also efficient payment processing, streamlined, understandable loan application procedures, timely information for student borrowers, accurate billing, payment crediting and interest calculations. Eight out of ten borrowers use FFELP lenders. They value the reliability of the FFELP programs – not just for funds availability but also throughout the loan process.

The FDLP can’t offer any of these things. Currently, former FDLP borrowers are suing the FDLP for wrongfully overcharging them on paid-off loans. The FDLP loan processor’s system was so overwhelmed one year that the entire system failed, which delayed payments for so long that Congress had to pass emergency legislation to deal with the problems.

Second, the FFELP lenders have worked long and hard to educate borrowers, and help them avoid defaulting on their loans. In the past fifteen years, the FFELP lenders have eliminated more than 75 percent of the defaults by working closely with borrowers and supporting them with education programs and other assistance when their loans enter repayment.

The FDLP has done none of this, and has a default rate nearly three times that of the FDLP. The FDLP program itself is $16 billion in debt. Tell me, what can an organization that overspends its budget by $16 billion dollars teach borrowers about avoiding default?

Third, the FFELP loans to students and parents cost less than the FDLP loans. FFELP lenders often help borrowers by offering discounts on fees and reducing interest rates. The law does not require these discounts. Lenders offer discounts to compete against other lenders. It’s a standard practice in lending, which you’ll find on all sorts of loans. It’s a way for lenders to encourage choice and reward good, loyal customers.

Uncle Sam doesn’t do that. There are no discounts because there’s no need to compete. There’s no benefit to the FDLP to do that and they don’t really care about what benefits the borrower.

Let your representatives in Congress know that you want to encourage competition among lenders. You want efficient loan processing, lending practices that reduce default rates and borrower education. You don’t want to be stuck with yet another government program that was awarded to the lowball bidder and that doesn’t benefit you.

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Tell your friends the truth about the proposed student loan legislation