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.

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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.

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You can see the effects of government-run programs everywhere and it’s not pretty. The Federal government fully manages the Veterans Administration. To say that it’s an embarrassment is an understatement: Medicaid, Medicare, Social Security, HUD, the list goes on. None of these programs is well run or well funded. Not one accomplishes the goals for which they were established.

Recently, we saw the deadly consequences of Federal inaction in Minnesota, where a major interstate highway bridge, known to be structurally deficient, collapsed. This country has tens of thousands of bridges that are obsolete or dangerous, and Congress isn’t doing anything about it, even though it’s Congress’ job. Congress promises funding, but doesn’t allocate it, or allocates it, but diverts it.

Students can bet that a Federal student loan lending program will become just one more competing priority when it comes to funding. Congressional Democrats are coming out of the woodwork to support these measures right now, but where will their support be when it comes time to choose between funding student loan lending programs and bridge safety programs? Or anti-terrorism concerns? Or heath care? Or pension bailouts?

Right now, Congress doesn’t have to make that choice. FFELP lenders make money available to students for their tuition needs, and they put the issue of student aid above the fray of Congressional funding. Under the plans in front of Congress right now, funding for education will have to scrap it out with every other Federal program.

When it comes time to cut the budget, the Congressional Democrats will preach the importance of self-sufficiency, and how it’s really the responsibility of the family to plan for and provide a college education, especially if the Congress must choose between funding higher education and their pet pork barrel projects. Rest assured, Congress places no higher priority on higher education funding than it places on any other Federally- funded program. Veterans, poor people, health care, senior citizens, cities, bridges, and students – they all need money, and there’s only so much to go around.

When it comes to changing the system that’s in place, the Congressional Democrats can’t sign fast enough to put their support on a bill, but when it comes to funding, where will their priorities be? Congress had to create all of the other Federal programs, too. Those same Senators and Representatives had to pledge their support for every other line item on the budget. When it comes time to put up the money, where will their priorities lie?

Borrowers are the center and focus of a FFELP lender’s priorities. Borrowers don’t compete with other borrowers for funds because the FFELP lenders have enough combined resources make the billions of dollars in loans that students need each year to attend our nations colleges and universities.

Tell your Senators and Congressmen that you don’t believe that their support of student loan reforms will translate in to more funding for students.

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The Senate and the House are wrestling with the problem of reconciling two completely incompatible student loan lending bills. The House has made promises that the Senate doesn’t want to deliver, and the Senate has made promises that the White House doesn’t support. Stuck in the middle are student loan borrowers who might likely end up with nothing of value, and are currently at risk of losing the stable student loan system they’ve enjoyed for more than 40 years.

Congress doesn’t seem to plan ahead, so both of these bills are retroactive to July 1 of this year. If one of these disasters, or some mangled mixture of the two, survives the reconciliation process, all of the changes in the bill must somehow magically take effect immediately.

This includes the interest rate reduction that the House has promised (if it survives, that is), the auction system that Senator Kennedy and Company have dreamed up, and the opposing provisions of the Star Amendment and the Sunshine Act.

Fall semester classes will start in less than a month and this issue is nowhere near a done deal. With this proposed mess waiting in the wings, no student can be sure that his or her college finances are stable for the coming academic year.

At least with the FFELP lending program, students know immediately how much money they have, and they can count on the money being there. These so-called reforms introduced by the 110th Congress are not reforms at all: they’re chaos. The Department of Education is suddenly supposed to carry out a system of auctions to determine which lenders can participate in the program and which can’t, retroactive to July 1 of this year?

The Congressional Democrats’ ham-handed attempt to prove to the electorate that they have the ability to do something will only result in utter chaos for the student participants in the student loan program. Worse, it will also reduce to rubble the budgets of the colleges and universities that rely on the funds they receive in a timely way from the FFELP lenders.

The last time the Congress monkeyed around with student loan lending via the FDLP, the federal loan payments were so late that Congress had to pass an emergency spending measure to keep thousands of students from being dis-enrolled from their institutions for non-payment. Is this really the kind of stability you’re looking for? This is exactly the kind of stability you’re going to get if Congress gets its way.

Tell your Senators that you don’t want the stability of the current system jeopardized so that they can score a few meaningless points with the electorate. Let them know that the electorate will be far more concerned about the havoc that these changes will wreak on the student financial aid system.

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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.

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The House and Senate are preoccupied with choice in student loan lending. That is, they’re preoccupied with how to restrict your choice in student loan lending. For some reason, they seem to think that choice is bad. Competition among lenders is the best mechanism for generating choice, and for some reason, they don’t want lenders to compete for your business.

Wait a minute? What happened to the whole “free-market” thing? You know, the one where competition is good, and it forces consumer costs down – the one where the consumer wins. Congress wants to get rid of that one, and replace it with a little number of its own.

Don’t think of it as losing your lending options. Think of it like this: the government has helped you narrow down your choices to one or two lenders. You didn’t have time to do all that research into FFELP lenders that could have saved you thousands of dollars over the course of your loan, anyway.

To streamline the process even further, the government has eliminated all of those confusing options that the FFELP lenders offered, like fee waivers, loan consolidations and interest rate reductions that would have lowered your bill even further.

And now, if you can’t find any lenders in your state, the government will do an “easy pick” for you, just like the lottery. I’m absolutely certain that the Lender of Last Resort will make an excellent student loan lender for you. Don’t you? I’m sure that the LLR will find ways to help reduce your bill by providing loan consolidations, interest rate reductions, fee waivers and the like, don’t you?

No matter which approach you look at, Congress isn’t doing you any favors by reducing choice and eliminating lenders from the student loan program. The program that provides the most choice in lending works best for most families. There is no one-size-fits-all that works for everyone. Unfortunately, that’s exactly what the Democrats in Congress are trying to do. They want to take away your choice and disable the free-market components that are working to keep your student loan interest rates low.

Congress isn’t interested in helping most families when it comes to student loans. They’re not interested in what’s best for the majority of student borrowers and they really don’t care about what you need. They waive the promise of a 50-percent rate cut to garner support for their bill, then they take that away, and leave a chaotic, incoherent mess in its place that doesn’t help anyone, and hurts most middle-class families.

Tell your Senators and Representatives that you want the program that provides the most number of student loan lending choices and that benefits the most number of American families.

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From a news item on the KOMU.com (Columbia, MO) web site, dated August 10, 2007:

“A lawsuit by student loan holders seeks to block Governor Matt Blunt’s plan to take money from the state’s student loan authority to finance college construction projects.”

The story goes on to say that the lawsuit also names the Missouri Higher Education Loan Authority for allowing its money to fund building construction instead of student loans for Missouri’s college-bound students. This story beautifully illustrates the real danger in having the government manage student loan lending.

“Show-Me” a state that doesn’t care about investing in its students’ futures and I’ll show you the Missouri State Legislature and its Governor, who feel perfectly comfortable redirecting student loan money to fund the state’s other priorities. Unless a court intervenes by August 28, 2007, the politicians will rip off Missouri’s sons and daughters to the tune of millions because their student loan money will be hard at work constructing buildings on the very college campuses that these kids can no longer afford to attend.

While you’re at it, “Show-Me” where the proposed Kennedy legislation prohibits the Federal government from redirecting funds in exactly the same way that the Show-Me State has done. Students have no guarantees that the Feds won’t rip the rug out from under their feet. When priorities change in Washington, honey-pots like a richly funded Student Loan program start looking like a good source of ready cash for something else. If nothing prevents the good men and women on the Hill from helping themselves to it, you can bet that dollars earmarked for funding student loans will be funding something else instead.

The travesty in Missouri should serve as a clear warning to those of you who think that having the Federal government manage loan programs is a good idea. It’s the Feds’ money, and Congress can apportion it as they see fit. Under the current program, the money allocated to fund student loans actually funds student loans. FFELP lenders don’t redirect this money to other loan programs. It isn’t available to other borrowers. The money is available only to student borrowers for the express purpose of funding college educations. FFELP lenders manage Federal student loan funds, and they take their fiduciary responsibilities seriously.

Under the new Federal regulations, you can kiss that brand of responsibility goodbye. As long as the government is in charge of the money, you won’t ever be certain that the money will be there when you need it. If you don’t believe me, ask any college student from Missouri.

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The Congressional Democrats say that they can save you money by simply eliminating the subsidies they pay to FFELP lenders. They can certainly cut the line item on paper, but they can’t reduce the cost of the program. Despite what they want you to believe, adding more students to the program is only going to make things worse. The government has always tried to foist off the cost of administration onto the colleges and universities. That’s why the participation rate in the FDLP is so low. The major problem with the FDLP is that the government has made it absolutely clear that it expects something for nothing.

Now, under the Kennedy plan, colleges and universities won’t have a choice. If they want to accept federal student aid, they’ll have to participate in the FDLP. At some point, colleges and universities may decide that they can no longer accept Federal aid because taking it means that they take a loss, or they must pass the increased costs on to their students. Either way, the students lose.

There’s no bright spot for the students in this program. Choice of lender is gone. Caps and lifetime limits on loans and grants mean that even needy students won’t have enough money to go to school. Colleges and universities may decide that it’s too expensive to accept Federal aid, and there’s no guarantee that the long-term funding of the program is even stable.

Kennedy’s plan authorizes these reforms to exist for five years, but only funds them for two years. And there’s no protection to ensure that the money diverted from subsidies will continue to be used to fund student grants and loans. Even if it were, $18 billion isn’t anywhere near enough money to increase participation in the program, increase caps and restrictions, provide new financial aid funding for students and maintain solvency.

The FFELP lenders must make things look easy, because when the Congressional Democrats look at the FFEL program, they think that the Department of Education is up to the task of running a program that provides the same program benefits at a much lower cost. When everyone else looks at the FFEL program, they see a well-run solvent program that provides lasting benefit and a good return for the taxpayer’s dollar. This is more than just perception, however. The facts back up the success of the FFEL program.

FFELP lenders know how to manage money. The government, on the other hand, knows how to borrow money. It knows how to print money. Evidently, it is also very good at wasting money. I have yet to see a government agency, however, that knows how to manage money. Until the government can demonstrate that its results are better than those achieved in the private sector, however, as a taxpayer, I’d rather have my money in the hands of someone who knows how to take care of it, spend it wisely when necessary, and invest it in all other circumstances. Tell your senators that the government doesn’t belong in the business of lending. The government should leave lending to those who built the program and understand how to make it work for everyone.

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The Congressional Democrats say they can save you money on your student loans by cutting out the subsidies the government currently pays to private lenders. If there are no private lenders, then all of those subsidies could go into increased aid to students. That’s the theory.

Let’s look at what the subsidies pay for. FFELP lenders use the subsidies to cover the costs associated with administering the program, and to fund the incentives they pay to borrowers. The incentives that Congress is complaining about are not cash bribes, as some in Washington would have you believe. Borrowers typically see incentives as reductions in interest rates or fee waivers for developing good payment histories, electronic payment participation, and on loan initiations and consolidations. These incentives directly benefit the borrower’s bottom line. Subsidies also fund borrower education, marketing and operational costs for the FFELP loans.

Congress says it can save money by eliminating these subsidies and redirecting a portion of these funds to student aid. Let’s put a little sunshine on that claim. In the FDLP, the government won’t pay for administrative costs associated with FDLP loans. The universities and colleges must pay those, which is why most higher ed institutions avoid the FDLP like the plague. The administrative costs for these loans are high!

If the Congressional Democrats get their way, colleges and universities will have no choice except to play the government’s game. The colleges and universities won’t absorb those costs, though. They will pass the costs on to their students in the form of tuition increases and fees. Students will have to borrow even more money to pay for college.

So what’s going to happen when more borrowers use the FDLP? That’s right – tuition’s going sky-high.

The Congressional Democrats are simply playing games with the numbers. They’re attempting to make you pay the administrative costs of their program. They don’t want to pay the administrative costs of the burdensome program they’ve created, and colleges and universities don’t want to pay that either, so guess who gets stuck with it. You.

For FFELP loans, the government does pay for its own administrative costs. Don’t believe the Congressional Democrats when they claim that these subsidies are profit for the student loan lenders. They’re not. The subsidies pay the administrative costs of the program – the same costs that the Congressional Democrats want to dump in your lap.

Don’t fall for this baloney. The government can’t design a program with no administrative costs, and the government doesn’t want to pay anyone to administer the program. The costs are real and someone’s going to pay them. For FFELP loans, the government pays for them. Under the Kennedy Plan, you’ll be paying these costs by yourself.

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The Bush Administration says that it cannot support the Kennedy Plan to change the role of student loan lenders. The President believes that the government should be doing more to fund grants that students don’t have to repay. The Administration wants to combat the real problem: the rising cost of tuition. The government could better spend its money helping the poorest of students by giving money that students don’t have to repay. Students who don’t qualify for Federal grants will best benefit from a competitive student loan environment where lenders compete for student’s business.

Everyone would benefit if the Federal government started paying some attention to the reasons that college tuition is increasing so much. The cost of higher education, after all, is primarily determined by the cost of tuition, housing, and books – not the few percentage points in interest charged on student loans.

The real culprit in the amount of student loan debt a borrower has upon graduation has nothing to do with his or her interest rate. It has to do with how much the student borrowed. Students can’t and don’t borrow money they don’t need. They borrow what they need to cover their college expenses – namely, tuition, room and board, and books. If Congress wants to do something for the poor college student, it should take a long, hard look at the cost of tuition, and start asking why college tuition rises so much faster than the rate of inflation.

Amuse yourself and do a Google search on the phrase “rising faster than the rate of inflation” to find out what’s getting more expensive. Prescription drugs, health care costs, wages, energy costs, food prices, and college tuition are all rising faster that the rate of inflation. Colleges and universities have to pay for health care and prescription drug insurance, employee salaries, energy to heat large public buildings, and food for resident students.

Congress can do something about rising health care, prescription drug and energy costs, three of the largest culprits. They could be addressing the cost of rising health care and prescription drugs. They could be promoting alternative energy programs to help colleges and universities reduce their energy costs. Instead, they choose to attack student loan lenders. Talk about disconnecting from reality.

Tell your senators to tune into the real reasons college tuition rises so fast and start attacking those problems at their sources, instead of looking for someone to blame. If they insist upon having someone to blame, tell them to look in the mirror.

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“Those who fail to learn the lessons of history are doomed to repeat them.” – George Santayana

The Federal Direct Loan Program was initiated in 1995 using the theory that if the government played the role of lender, student borrowers would benefit through lower loan costs because the government lender would not be interested in making a profit, but rather, its interests would be in helping students through college. Sound familiar? Look on the bright side: at least the Congressional Democrats recycle.

Sounded good at the time, but let’s take a look at what really happened. In the first 10 years of operation, the FDLP spent $105 billion for subsidized interest payments, and took in only $89 billion, leaving a $16 billion operating loss from which the program has yet to recover. The theory used to initiate the FDLP was faulty. The program didn’t work in 1995 and it still isn’t working in 2007.

Today, the Congressional Democrats have dusted off the old arguments used to advance the FDLP in the first place: that government can save students money by becoming a lender. The government isn’t interested in making a profit; it’s interested in getting students through college. Congressional Democrats assume that all FFELP lenders are bad because they focus singularly on profit. In Congress, profit is apparently a synonym for abject greed. And as we know, Congress reserves abject greed for itself.

The old arguments produced a program that increases the national debt every year it operates and has yet to break even, despite 12 years of the government’s best efforts. More than 80 percent of the colleges and universities in the US won’t touch the program with a 10-ft pole, and 8 of 10 students don’t qualify for assistance under the program.

For some reason, the Kennedy crowd thinks that adding more students to a program that doesn’t work now will somehow make it work well. Apparently, the trick to lending is volume. Volume magically allows failed spending programs built on defective theories to turn themselves around and start saving the government money.

FFELP lenders may make a profit on the loans they offer, but they do so by very careful management of the government’s (and the taxpayer’s) money. This is something the government is incapable of doing. They’ve had 12 years to show they know how to manage student loan programs, and so far, all they’ve come up with is $16 billion in debts for a system that most higher education institutions deliberately avoid and most students can’t use.

Stop your senators from repeating history. Tell them to go back and look at what the FDLP said it would do in 1995 versus what the record shows it has done in 2007. The facts speak for themselves. The FDLP can never deliver what the FFELP has been delivering for 42 years. Tell your senators that enough is enough.

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A recent audit by the Government Accounting Office determined that four Department of Veterans Affairs centers were missing $6.4 million of computer equipment. This loss was at just four VA locations. The VA Medical Center in Washington DC accounted for 28 percent of the missing computer equipment. An earlier audit at five other VA centers showed that an additional $6.8 million in equipment was missing. Between the two audits, $13.2 million vanished.

In addition to lost and missing equipment, the GAO also found that computer hard drives which contained names, Social Security numbers, and medical histories of US military veterans were being disposed of without having this information removed.

VA employees failed to report missing items for months, or even years. They allowed hard drives with personally identifiable information to sit around unsecured for years before wiping information from them. Often, they didn’t wipe drives at all before selling them as surplus.

The GAO characterized the audit as revealing an “overall lack of accountability” and commented that there was a pervasive “lack of personal accountability” at all four locations in the second audit. No kidding.

Is this how you want the government to handle your identity? Would you want them to sell your Social Security number and financial data as scrap? This is accountability you can expect from the Feds. The GAO’s files overflow with tales of this kind of Federal mismanagement. Congress makes all kinds of rules for private firms about how they must handle financial and medical information, but never once does it occur to anyone in Washington that the rules also apply to them.

Don’t plan on having your personal financial information handled conscientiously by the Feds. They obviously don’t care. When they lose track of equipment for months or years, and sell data on hundreds or thousands of people as scrap without making a single effort to protect data privacy, they will no doubt subject student loan borrowers to the same privacy violations.

Most FFELP lenders are part of the banking industry and follow strict rules for handling personal data. It’s just a good business practice to make sure that you protect your customers’ financial data from theft. You certainly don’t sell it as scrap. The Federal government isn’t in the business of handling people’s financial data properly. How do you think the government can “save so much money” on running the student loan programs? Well, cutting corners on privacy protection seems to be at least one money-saving idea.

Tell your Senators that you want the same accountability and financial data privacy that FFELP lenders offer, and if the Federal government can’t guarantee that, they should leave the business of lending to professional lenders.

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Wayne State University in Detroit announced a tuition hike of nearly 18 percent for the Fall 2007 semester. Central Michigan University’s tuition rose by 21 percent. On average, Michigan’s public universities raised tuition by more than 11 percent for the 2007-08 academic year to make up for cuts in funding from the State of Michigan.

According to Jennifer Pae, President of the United States Student Association, quoted in the Detroit News: “The tuition hikes come at a time when federal financial aid has not kept pace with the rising costs of education. At one time Pell Grants, which are scholarships to the neediest students, covered two-thirds of the cost of unmet need for students, but now that’s just one-third.”

When tuition rises by 18 percent from semester to semester, Senator Kennedy’s Federal financial aid increases simply don’t cover increases like that. This is especially true at Wayne State University, which serves many of Michigan’s poorest students.

To make matters worse, the Kennedy plan keeps the annual and lifetime caps on subsidized Federal loan lending. The “set-and-forget” loan caps are a scandal by themselves. Congress imposed caps on Stafford Loans and then forgot about them. This year marks the first time since 1992 that Congress has adjusted the limits on Stafford Loan borrowing. Rip Van Congress slept for 15 years while the cost of tuition soared.

The Federal government is insensitive to the rising costs of higher education. To allow borrowing caps to go unadjusted for 15 years, while tuition spirals out of control is unconscionable, yet that’s exactly what’s happened.

Caps on aid and lending, and a refusal to allow private lenders to participate in the financial aid process will guarantee that the neediest students don’t have enough money to finish their educations. Unmet financial need will prevent hundreds of thousands of our poorest students from completing a college degree, and Senator Kennedy’s plan doesn’t do anything about that.

The phenomenal growth in private lending for college testifies to the fact that students turn to private lenders when they can’t get financial aid from other sources. The nearly 1,000-percent increase in private lending while Congress slept proves that financial aid from other sources simply hasn’t kept pace with the demand. What will the Federal government do when the number of students who enroll in college increases over the next 10 years? When students can no longer get loans from private lenders, and the Federal government can’t supply enough aid to students, enrollments at our nation’s colleges and universities will drop. We’ll return to the early-60’s, when only children of the wealthy could afford higher education.

Tell your Senators that token increases in Stafford Loan caps are too little, too late. Tell them to wake up and address the real problem: the soaring cost of tuition.

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Tell your friends the truth about the proposed student loan legislation

Senator Kennedy’s plan increases the limit on the Federal Pell Grant from its current level to $5,100, and provides for an increase in the grant limit of 5.9 percent by 2011. Unfortunately, the average increase in tuition costs at US universities is 6 percent. Per year. Senator Kennedy’s plan will put the Pell Grant increases behind the eight ball in the first year.

The real problem is and always has been the massive, unchecked increases in the tuition rate at colleges and universities. The interest rates on student loans doesn’t change or influence the amount a student has to borrow in any way. The amount of the tuition, room and board, books and other expenses determine how much a student borrows. At best, the interest rate determines from whom a student borrows.

By doing things to decrease the principal amount each student needs, Senator Kennedy could be solving the real problem. But he’s not. He’s punishing student loan lenders for being there for students and for providing the only viable vehicle for students and their families to finance a college education. He’s punishing student loan lenders for doing what the Congress asked them to do, using the program rules that Congress and the Department of Education established.

Senator Kennedy’s plan doesn’t do anything to attack the real causes of high student loan debt, and his bill provides no long-term solutions for it. Instead, his proposal increases the Federal deficit by substituting a deficit-ridden, poorly managed program for one that is working well for millions of American students, and limits a borrower’s ability to make good financial decisions within a competitive lending environment.

Studies have shown that there is a real relationship between the amount of Federal aid disbursed and the increase in college and university tuition levels. The more the Federal government gives, the more the colleges and universities take. After all, it’s “free money” right?

Student loans, on the other hand, counteract tuition increases. When students are conscious of how much money they’re borrowing, understand that they’re responsible for repaying the principal, and consider the rate and term of repayment, they are more conscientious consumers. Price sensitivity factors into the student’s buying decisions. It puts pressure on the colleges and universities to compete with each other and keep tuition rate increases low.

Tell your Senators that you don’t want to deal with a program that squelches competition and contributes to the high cost of college tuition.

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Tell your friends the truth about the proposed student loan legislation

Senator Kennedy claims that he wants to make college affordable. Forget the fact that he’s starting at the wrong end of the problem. His student loan reforms have nothing to do with making college more affordable. He wants to penalize the FFELP student loan lenders for a job well done.

Senator Kennedy wants you to believe that student loan lenders are making money hand-over-fist off of student loans. Yet, the Congressional Research Office and the study most recently conducted by Mark Kantrowicz from FinAid.org both agree that Sallie Mae, the nation’s largest student loan lender, has an after-tax profit margin of less than one-half cent per dollar. One half of one penny per dollar.

This flies in the face of the outrageous claims that the Congressional Democrats are making about the money to be made in student loan lending. One half of one penny per dollar. Wild accusations about excessive gains are simply not true. Even the Congressional Research Office reached the same conclusion. Yet the Congressional Democrats insist that FFELP lenders are ripping off the government, borrowers and anyone else they can get their hooks into.

Senator Kennedy and Co. have proposed drastic cuts that will permanently damage the student loan lending industry. Most private lenders will be eliminated from the program. Those that remain have few incentives to stay. Kennedy even recognizes the magnitude of the damage the legislation will produce. His bill establishes “lenders of last resort” for those states whose lenders can’t or won’t participate in the sham “auction” plan the Congressional Democrats have contrived.

Right now, borrowers can apply for loan monies – often from their own banks, credit unions and local financial institutions. Under Senator Kennedy’s boondoggle, students can no longer go to the lenders they feel comfortable dealing with. They can choose from a strictly limited list of no more than two lenders per state. Students can no longer choose their own lenders. Lenders can no longer offer incentives and rewards to borrowers who carefully handle their loan payments. And for what? Because Senator Kennedy thinks that one half penny per dollar is an outrageous return on the FFELP lender’s investment in a borrower.

Call, write or email your Senators and tell them to look at the research done by their own budget office. The research doesn’t support the idea that student loan lenders are pocketing mountains of cash from the government and from borrowers. The facts support the position of many FFELP lenders who are in the program to help invest in America’s future. Tell your Senators to stop trying to fix a program that’s not broken!

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 and
Tell your friends the truth about the proposed student loan legislation