Among the big successes of the FFELP is the low default rate of student borrowers. Low default rates don’t just happen. The FFELP lenders have had to work very diligently to develop programs that help student borrowers understand the importance of paying back the student loans they’ve taken.

Because FFELP loans are backed by the Federal government, the Federal government ultimately must make good on the student loans that students fail to repay. In that light, why should the FFELP lenders care whether a student defaults on their student loans or not? After all, they get paid regardless of whether the borrower performs or not, right?

The FFELP lenders care because repayment is part of lending, and lending is what they do. FFELP lenders don’t want to return a bunch of bad debt to the government. If they did, the government would no longer agree to back their student loans. The FFELP lenders, therefore, work very hard to make sure the loans they write get repaid when the time comes.

FFELP lenders provide an extremely valuable service, by helping students understand the consequences of default, strategies for avoiding default, and options when they need additional forbearance, a longer repayment period, a smaller monthly payment, student loan consolidations, a better interest rate, and in some cases, outright debt forgiveness.

All of these educational programs will fall by the wayside under the new student loan rules. Default rates in the FDLP hover around 25 percent, compared to a 5 percent default rate on FFELP loans. The Feds will eat the non-performing student loans and pass the cost back to the taxpayer. Unlike the FFELP programs, which save the Federal government (and ultimately you, the taxpayer) money by preventing default, the Federal program will just “absorb” the loss. There’s no absorption, unless the Feds are talking about the money they “absorb” from your wallets. There’s a direct cost to taxpayers when a student borrower defaults on a student loan.

Would you rather work with a lender who is successful in reducing default rates, or are you OK with the government’s approach of handing the loss off to the taxpayer? Tell your Representatives and Senators in Congress that don’t want to foot the bill for the Feds’ poor management of its student loan portfolio. Tell them that if they can’t reform the FDLP to produce the same low 5-percent default rate on loans, that they should leave the business of lending to the professionals.