Many features of FFELP student loans that borrowers take for granted have been wiped out by the new legislation. Federal student loan consolidation is a major benefit that borrowers now enjoy. Under the new plan, students will be required to borrow from a few prescribed lenders.

Wasn’t one of the government’s complaints that colleges and universities were using “preferred lender” lists? Isn’t it ironic that the government’s solution to preferred lender lists is … surprise… pre-determined lenders that students must work with to receive their student loans! Huh? Instead of creating a mechanism that improves competition, Congress, in its wisdom, has decided to create the ultimate “preferred lender list.” If you’re lucky, your state will have two such lenders. If not, you could have one or none. Don’t worry; the Feds will assign a lender for you. How’s that for choice?

Most FFELP lenders will be eliminated from the program, or will opt not to participate in Senator Kennedy’s as-yet-to-be-determined auction. This isn’t an ordinary auction, because the Feds have already rigged the bids. The auction participants are supposed to compete with each other by “bidding” on the lowest compensation they’re willing to accept.

For a group of lenders that have supplied student loan funding for the last forty years, and who have enabled 50 million Americans to realize their higher education goals, this is a real kick in the teeth. Congress is looking for a quick fix – not for the problems in the student loan industry – but for the perception by voters that they’re too incompetent to get anything done. To change that perception, they’re willing to carve up a perfectly workable program and substitute the FDLP mess in its place.

Don’t kid yourself into thinking that the Department of Ed is capable of running a student loan program. They already run the FDLP, and loan payments to colleges and universities have been so late that Congress has had to step in and provide emergency funding to prevent thousands of students from being disenrolled by their institutions for lack of payment.

Yes, this is what you can expect from Uncle Sam. The Department of Ed has neither the expertise nor the manpower to pull this off. Worse, they don’t possess the political clout to get things done quickly and efficiently. Unfortunately, millions of students depend on quick and efficient, which is what they receive from the FFELP lenders. Colleges and universities rely on quick and efficient to receive loan payments, which represent their operating capital.

The Feds can’t deliver either, and no one will be served by this program. Tell your representatives in Congress that you don’t want to give up the quick, efficient administration of student loan lending that you’ve come to expect from FFELP lenders.