It still baffles me that the Congressional Research Office can tell your Representatives and Senators that their plan won’t save you money, and that very few of you will realize any benefit at all, and yet Congress persists in pushing this unworkable mess down our throats.

The Congressional Democrats are truly excited about what the Kennedy Plan will save you. What the plan is going to cost you is really much more to the point. Let’s take a look at what you’re going to lose.

First, you won’t have a choice of lender. The Kennedy plan sets up a ridiculous “auction” scheme, where the government has already capped the maximum interest rate it will accept from lenders, and limits the “winning bids” to two institutions per state.

Second, you’ll lose stability. If your state musters two lenders who are willing to make loans under these absurd conditions, they’ll only have the right to make these loans for two years at a time. After two years, the government again “auctions” the right to make student loans. You may get stuck with two or three lenders in the time it takes you to complete an undergraduate degree, and if you go to grad school, you might end up with lenders four and five. Is that kind of complexity really what you want?

Third, you’ll lose the ability to consolidate your loans. This is the thorn in Congress’ side, and they want it out bad. They were the ones who originally decided that you should be able to consolidate loans. When interest rates fell, however, that cost the Feds a lot, and they’re very unhappy about it. It seems like they’re taking it out on the FFELP lenders. In truth, they’re sticking you – the borrower. Under Kennedy’s plan, you won’t be able to consolidate your loans anymore. You could be paying five different student loan bills every month after you graduate. Five!

Fourth, the Kennedy Plan relies on deficit spending to fund student loans. Government issued bonds are long-term obligations. What this means for you is that after you finish your student loan payments, you’re still stuck paying the interest on the bonds the government issued to fund your loan in the first place. There’s no savings in this plan for you. You’ll be paying for this plan long after your itemized debt has been retired.

If this doesn’t really sound like a good way to save a few bucks, you’re right. It isn’t. Call your Senators and Representatives and tell them that you’re not interested in losing choice, stability, your ability to consolidate loans and that you don’t want to fund student loan programs through deficit spending.

Protect your right to choose. If you don’t speak up now, your rights may be gone forever.

Congress is still wrestling with the mess it made of student loan lending with last month’s legislation. The President has already indicated that he’s not interested in signing a plan like the one the Senate passed. The House plan is virtually incomprehensible, and promises pie-in-the-sky interest rate cuts that the Senate won’t deliver.

In the mean time, the borrowers are stuck in the middle. What’s the best course of action? First, learn about your options. Many people will tell you to get subsidized Federal student loans as a first preference, because they’ll save you money. Not true. That advice is about as helpful as telling you to go win the lottery is.

Not every prospective borrower is eligible for Federal student loans. Subsidized Federal student loans are available only to a small percentage of applicants, and a student’s financial need determines their award. If you and your family don’t meet specific income criteria, you don’t get subsidized loans.

You probably don’t get the best deal with Federal loans. FFELP lenders compete for your business. They offer interest rate cuts, origination and other fee waivers, and incentives for developing a good payment history. You don’t get any of that with Federal student loan programs, and with the exception of PLUS loans, the FDLP offers the same starting interest rates that the FFELP lenders do. Chances are good that you’ll save money by going with an FFELP lender over the FDLP.

After you’ve learned about your options, do some homework on potential lenders. Unlike the lies that the Congressional Democrats and Andrew Cuomo would have you believe, most FFELP lenders are honest, fair and forthright. They’re not in the game to take advantage of you and your university. Under the FFELP program, you have the right to choose any lender you like, regardless of whether they’re listed as a preferred loan vendor by your institution or not. You are always in control of your choice of lender. (That won’t be true under the Kennedy Plan, though.)

Choose the lender that best fits your needs and offers the incentives that best suit your situation. Lenders will compete for your business and can put together some very attractive financing packages. Pay attention to loan interest rates, but also pay attention to loan servicing. The direct impact of your loan servicing will mean more to you in the long run than the interest rate will. Congress caps the student loan interest rate for lenders in the FFEL program. The caps do not apply to non-FFELP loans, so it always pays to know whom you’re dealing with and what kind of loan you’re getting.

Congress wants to eliminate your choice. I suppose that’s one way of simplifying the process, but there’s a real, negative cost to simplicity, and that’s loss of choice. If you want to preserve choice and options, tell your Congressmen and Senators to stop shoehorning you into the Kennedy loan program

In a conference call with reporters recently, Secretary of Education Margaret Spellings outlined a plan to provide additional oversight to student loan lenders. Ed’s plans include meeting with other representatives from other Federal agencies, such as the FDIC and the FTC. She also stated that Ed was in a “fact-finding” phase.

Ed is supposed to be supplying oversight to the student loan lenders right now. The questionable practices of a few student loan lenders arose under the watchful eye of Ed. Ed never said a word about these practices, never raised a single concern, never issued a warning, made a regulation, or investigated a single lender, even though Ed is vested with this authority, and frankly, it’s Ed’s job.

After all of the media coverage, investigations and even action by Congress, Spellings’ announcement that Ed is “fact-finding” goes beyond the pale, straight into the theater of the absurd. This is the agency that Congress has tapped to oversee the newly increased responsibilities of the Federal Direct Lending Program. You know, the one that Congress thinks will do a better job of managing the student loan program than private lenders will do?

The vast majority of FFELP lenders are honest, dependable to a fault, and provide the best possible lending terms and servicing programs to their borrowers. FFELP lenders have proudly served this country and its students for more than 40 years. It’s unfortunate that the actions of a few rogue lenders have tainted the reputations and the contributions of the FFELP lenders who have delivered service, convenience, and competitive loan products to America’s college population since Lyndon Johnson was in the White House.

In some ways, Ed has contributed significantly to the problems by failing to provide adequate advice and guidance to both borrowers and lenders, regulation of participants and sanctions against lenders who have abused the system. It’s not that Ed doesn’t have the power to make regulations; all Federal government agencies have basic regulatory powers in the absence of legislative direction. Ed could have done something to correct these problems, and instead, chose to do nothing.

Congress rewards this failure and lack of accountability by giving more responsibility to a slow, unresponsive agency that can’t even manage its own lending program properly. This approach shows just how far out of touch with reality Congress is. One of the real problems is that Ed isn’t providing oversight – so fix the real problem. Fix Ed and stop blaming honest, fair and diligent FFELP lenders who work within the program rules.

Tell your representatives in Congress that the real problem is that Ed is asleep at the switch. Honest FFELP lenders will have no problem cooperating fully with reform. They have already shown their willingness to correct improper or questionable lending practices without legislation. Once Ed starts providing real oversight, borrowers, lenders, politicians and the public will see real reform in student loan lending.

The Billings Gazette ran http://www.billingsgazette.net/articles/2007/08/04/opinion/guest/50-standards.txt
on August 4 regarding the way FFELP lenders work in Montana. It clearly explains the good that Montana’s FFELP lenders have done, and it illustrates just how backwards and damaging the proposed legislation will be.

To start, local lenders make most of Montana’s FFELP student loans. Students invest locally by borrowing from local lenders. By itself, this is a tremendous benefit of the FFELP program; students borrow from lenders they know and trust. They build a relationship with a lender that can last a lifetime.

The Montana Higher Education Student Assistance Corporation (MHESAC) buys eighty-five percent of these local loans for loan servicing. This non-profit company operates in Montana for the benefit of Montana’s lenders and student borrowers. By buying loans from the local lenders, MHESAC provides additional funds that local lenders can re-issue to new student borrowers. Again, this is another beautiful benefit of the FFELP public-private partnership.

MHESAC lends only to the residents of Montana who also attend Montana’s higher education institutions. MHESAC doesn’t want to service the world; they only want to do what’s best for Montana’s college students. Here is another powerful illustration of the benefit of the FFELP programs and how they benefit their own communities.

MHESAC’s products provide substantial benefits to the borrower: fee-less FFELP student loans, principal forgiveness, and interest rate reductions. According to the article MHESAC has provided more than $1.5 billion dollars for Montana’s college students and more than $34 million in borrower benefits since 1980.

How could this possibly get any better? The Student Aid Foundation works with the MHESAC to provide day-to-day loan servicing to Montana’s student borrowers. The SAF has given more than $106 million in grants and other benefits to Montanans since 2000. SAF’s grants have gone to students in need and community groups; and have provided funding for outreach programs, financial aid nights, debt management programs and also fund the Montana Career Information System on the Web, and the Montana College Goal Sunday programs.

Once again, Congress has gotten it all wrong! Congress has the nerve to accuse FFELP lenders just like the MHESAC and SAF of profiteering at the expense of borrowers, and Congress wants to destroy programs like this. Montana lenders, like many others throughout the country, have taken the money given to them through the FFEL program and have invested it in their states and their communities in ways that benefit everyone.

Contact your Congressman or Senator immediately and tell them to stop their shameful persecution of FFELP lenders like MHESAC and SAF, that their profits to benefit their local communities.

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

On August 2, the Congressional Research Service concluded that the student loan “relief” being proposed by Congress would provide very little relief to most students, and many students don’t really need relief in the first place.

This is a classic example of Congress dreaming up a problem that doesn’t really exist, and then crafting the worst possible solution for the pseudo-problem. The Congressional Research Service is a Congressional agency. It’s their job is to research the facts and then provide them to Congress. Congressional researchers are saying what the student loan lenders have been saying all along: the Congressional Democrats have got it all wrong!

According to the report, the average college student would save $18 per month, if the government enacts these reforms. $18 per month! The Congressional Democrats are vilifying student loan lenders, accusing them of all manner of malfeasance, and blaming them for the high level of student loan debt when students leave college. They make matters worse by promising real reform, and the best they can come up with is $18 per month?

$18 per month might buy six gallons of gasoline or three modest lunches at McDonalds. It amounts to $216 per year. They’re complaining about students coming out of school with $25,000 or more in debts at the end of college and the most effective reforms they can come up with will return an average of $216 per year. That’s not real reform. That’s insulting.

FFELP lenders provide far more in relief each year per borrower. Fee waivers, interest rate reductions, consolidations, and outright debt forgiveness allowed under the current system do much more to reduce student loan debt than a $216 reform would.

Aside from the fact that the FFELP programs provide much more in relief right now than the government’s cock-and-bull plan would, most students don’t need relief from student loan debt. For most students, the report finds that student loan debt is entirely manageable when a borrower begins to work full-time.

That’s because FFELP lenders work hard to make sure that students can repay the loans they have taken out. Students can choose to repay loans over 10 years or longer, and there are no penalties for paying off loans early. In fact, early repayment is encouraged because it makes more money available for new borrowers.

Tell your Congressmen and Senators to start paying attention to their own researchers: most student loan borrowers don’t have difficulty paying back their student loans, and the proposed relief isn’t going to help anyone.

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