The Washington Post has been particularly interested in EduCap, lately. It reported that the largest private student loan lender in the country had laid off several staff members and was considering closure. The Post has printed several unfavorable articles about EduCap in the recent past.

I have no idea whether the Post’s accusations about EduCap are true, but for a moment, assume they are. EduCap’s current position proves beyond a shadow of a doubt that student loan lenders that engage in less-than-honorable lending practices can be reformed or removed from the industry under the current system. In other words, there’s no real need for Congress to make the draconian reforms it’s considering because the student loan lending industry can reform itself.

The Washington Post’s revelations are nothing new. EduCap has been laying off staff members for a year or more, due in part to a change in its financial circumstances. Why fewer students are approaching EduCap for loans, I don’t know. But, the fact that student borrowers are going elsewhere is a prime indication that competition works. Student borrowers are going elsewhere because they’re finding highly competitive deals elsewhere.

This fundamental right to choose one’s student loan lender is at the heart of a healthy, functional and competitive lending program. I’m talking about the same fundamental right to choice that your Senators and Congressmen want to abolish. If you want to restore choice in student loan lending, talk to your Congressmen, because the bill they passed doesn’t give anyone any choice at all. According to them, it’s the FDLP or nothing!

The Senate bill allows you to choose between no more than two lenders in your state. In reality, your state could end up with a single student loan lender lender, meaning that you would have only one “choice”. If things don’t go well at auction in your state, your state would have no qualified lenders, and the government would choose a lender for you. That’s some choice.

The system we have now works as designed. The lenders who take advantage of borrowers find themselves on the doorstep pretty quickly, thanks to free and open competition. Talk about sunshine. Nothing exposes a lender’s flaws better than true, honest competition.

The FFEL Program offers borrowers real, honest competition, where lenders compete with each other, and keep each other honest. Lenders are interested in your business, and they will compete with other lenders to get it. Under the plans Congress is now considering, you’ll end up with monopolistic or duopolistic lenders, if you’re lucky, or whatever the government scrapes together if you’re not.

If you want honest, true and fair competition, tell your Congressmen and Senators to stop tying your hands when it comes to choosing your student loan lenders.

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