There has been lots of coverage about the new “reforms” Congress has passed regarding student loan lending. Despite evidence that suggests the government is not the best entity to manage such a program, that taxpayers will not save any money and in fact, may end up spending a lot more, and that the new plan holds little, if any, benefit for most student loan borrowers, Congress is determined to prove to the nation that it has the ability to get something done. Sadly, instead of doing something useful, this reform is where the Congressional Democrats have planted their flag.

The issue of loan consolidation keeps coming up. It’s a big one, since the Senate plan allows loan consolidation only under an extremely limited set of circumstances. For the most part, student loan borrowers will no longer be able to consolidate loans. Combined with the fact that the Federal government may force student loan borrowers to use as many as three different borrowers for a four-year degree, the loss of loan consolidation is a major blow.

Naturally, it gets worse. Some lenders use offshore loan servicing companies to provide customer service support for their loans. When you call the 800- number, your lender will route your call to a call center in India, Southeast Asia, or Eastern Europe where operators read from prepared scripts to deliver customer service. Under the new system, the borrower has no ability to consolidate loans, meaning that you can no longer vote with your feet when your lender turns out to be a dud. You’re stuck with that lender until you pay off your loan.

Just think about it: under the new program, you could get stuck with two or three dud lenders, and the great lender that your brother, sister or friend had when they were in college is no longer even part of the program. Offshore loan servicing, poor customer service and no mechanism to transfer your loan to a more responsive lender. Be sure to thank Senator Kennedy and the Congressional Democrats for that when you’re stuck in Student Loan Hell.

America is all about competition, but for some reason, Washington doesn’t see it that way. They don’t want competition in the traditional sense. They don’t want competition that benefits you, the consumer. They want sham “competition” where you have a “choice” of perhaps as many as two lenders in your state. You might only have one “choice” and if no lenders in your state want to participate in the program, the Feds will throw you to the “lender of last resort.” What kind of loan servicing do you think the Lender of Last Resort provides? Will they job out your loan problems to the Loan Servicer of Last Resort? You can pretty much count on that.

Tell your Congressmen and Senators that you want real competition in student loan lending, that you want a choice in lending, and that you want a workable mechanism for consolidating your student loans. Tell them to stop taking away your right to choose.