You’ll never guess how I spent my evening. Actually you probably will since I’m posting this on StudentLoanTax.org! My friend Brandi is a grad student. She has several more semesters in her future before she will be qualified for her future profession. Tonight we took a look at her student loan situation. She needs to borrow more money than expected for the fall so she wants to plan ahead. Brandi is doing everything a responsible student should do. And then we did some math…Ouch!

When Brandi’s started grad school her undergraduate loans were deferred for payment. Some of those loans are subsidized and some aren’t so the meter is still running on the unsubsidized portions. Not including this interest she owes roughly $30,000. That’s just for her undergraduate degree. Her graduate degree is going to add up to about $22k in loans. This is when she took a deep breath. $52k.

The Bureau of Labor Statistics says her chosen profession has a median average of $34,820. That’s not the first year average! That median salary includes the big money makers. Her starting salary will probably be more like $30k. The job outlook is good – it shows a general upward trend for growth. The potential earnings are bad – it shows a general downward trend that isn’t keeping up with inflation. Even if Brandi had no other bills, and that’s just not realistic, and spent every after-tax dollar she makes her first year, not even half of her tuition loans would be paid off.

Luckily her current school participates in the FFELP plan and her loan amounts have been increased due to her financial needs. Luckily the bank managing the FFELP loans has some really good incentives. As long as she makes her first 30 payments on time, she will receive a 3% cash rebate on the remaining principle. If she participates in their automatic payment program she can save a third of a percent in interest. That might not sound like a lot, but that’s $200 she doesn’t have to pay back. Any savings in her situation is a definite plus!

So why would Congress want to take these incentives away from Brandi? What could they possibly get out of costing her money? They get short-term political gain in exchange for her long-term financial worries. If our elected officials think that’s what we the people want or need it is time to give them their own education.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

Using the same logic as the Senate Education Committee, I’ve come to some astounding conclusions:

Insurance companies should not be allowed to offer discounts to their largest volume customers or to their long-term loyal customers.

Publicly held delivery companies such as UPS, FedEx, DHL, et. al. should not be allowed to handle any packages until the United States Postal Service decides they don’t want that particular delivery.

Even though the orange juice industry has made detailed studies and created products consumers wish to purchase, varieties will henceforth be limited to “from concentrate” only and the government will ensure pulp is kept to 2%. The government will not have to explain how they intend to ensure this or if the 2% is per carton, vat, or general principle.

So don’t worry when your overpriced prescriptions arrive two days late, because your chances of choking on pulp, while trying to stave off scurvy, have been all but eliminated. Thank you Congress!

Of course I’m being facetious, but I think you get my meaning. We want the government to help get mail delivered, keep medications economically available, and protect us from dangerous products, but we don’t want them to take away our options or add needless bureaucratic meddling to industry.

Insurance companies offer discounted plans to large corporations because they are large. More employees mean more policies which means the volume helps disperse the costs. As long as everyone doesn’t get sick at the same time the insurance company can make a profit which will pay for the discount.

Competition has made the Post Office better than ever. Improvements, upgrades in technology, realizing citizens are customers – all brought to you by the beauty of capitalism.

Beverage companies don’t waste time coming out with products they think will fail. They’ve found ways to make multiple products and stay profitable. And while I’m not advocating the FDA step out of the picture, the orange juice people aren’t going to purposely make products that kill their customers.

The current proposed legislation to improve financial aid for college students makes a lot of bad assumptions. The worst of which is the assumption students and lenders don’t know what is best for them. Congress thinks by limiting the options and opportunities for both groups neither will be able to make the wrong choice. No, Senator, it just means they have no choice.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

I hate to get all political about this, and I’m sure Sen. Edward Kennedy is a fine person (OK – I’m NOT so sure about that), but does he really think he can play both sides of the student aid issue and keep what little credibility he has?

He says it is time to stop thinking about profits and start thinking about students. Then he says the FDLP (Federal Direct Lending Program) is more profitable for the government than the FFELP (Federal Family Education Loan Program), so the FFELP must be reformed. Whoa right there, senator. That would mean you think the only way to better serve students is if the government makes a profit? I think Kennedy was seeing just how much fuzzy math, faulty logic, and how many unsubstantiated assumptions he could pack into one piece of legislation.

I agree that students need to be championed. I think you would be hard-pressed to find anyone who would say students and education are not important to the future of America. I bet you couldn’t even find someone in the lending business to say it isn’t important. In fact, lenders have a more direct reason than anyone to support students. Why? Profit. There – I’ve said it, and I refuse to accept the senator’s argument that private profit is a dirty word. Part of the practical reason students go to college is to get better jobs when they graduate. They’d like to get a little personal profit. Who doesn’t?

So Kennedy’s plan would champion students by a) removing their options, b) tying students with governmental apron strings, c) forcing private lenders to reduce staff … How exactly does this help students? It isn’t helping students pay for college, which is what the senator and the other members of the Senate Education Committee should be trying to do. Drafting legislation to make a political point is wrong. Claiming that legislation is in the best interest of an underrepresented group like students is a lie.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

Congress is making some promises to students it just can’t keep with the current surge of proposed legislation. The only things wrong with its argument are math (which is based on assumptions, not on evidence) and reality. Let’s face it. How many congressmen actually had to borrow money to pay for college? Do they understand the real world of recent college grads who don’t have family connections to help them?

Our typical student, Greg L., borrows his maximum every year for four years starting this fall. He plans to graduate at the end of those four years. His subsidized loans mean he will not have to pay the interest on the loans until six months after he graduates and he begins paying off the loans.

Freshman Greg receives $2,625 at 6.12% as a subsidized loan for the 2007-2008 academic year.

Sophomore Greg receives $3,500 at 5.44%. He’s thinking of changing majors.

Junior Greg receives $5,500 at 4.76%. He’s too wrapped up with his internship to notice the decrease.

Senior Greg receives his final subsidized loan for $5,500 at 4.08%. He’s trying to figure out how to fit three quarters worth of classes into two semesters.

It’s now 2011 and Greg L. hasn’t slept in a year, but he did manage to graduate on schedule. He borrowed $17,125 in subsidized government loans. He will have to start paying them back in six months. That means Greg will have to find a job, move, get a place to live, and receive enough salary to afford paying back the loans. The clock is ticking!

If our Greg L. is like the vast majority of college students attending a four-year university he has other loans to pay back. He won’t get far with $5,500, even at the most inexpensive public schools. So Greg had to go to some private lenders, and they helped him pay for the rest.

Those private lenders understand that having just graduated, Greg L. is getting started on his own. He’ll be earning an entry level salary and facing many financial needs, so he may not be able to repay the loans right away. That’s why lenders will offer him a student loan consolidation loan that will lower his overall interest rate, lower his monthly payment, and give him a payment schedule he can follow.

So subsidized loan rate changes had zero net effect for Greg L. Nothing. Nil. Technically the rate changes cost him money, as all taxpayers had to pay for the legislation to be drafted, debated, committee’d, re-drafted … well, you get the idea. It’s a shame Congress hasn’t.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

Have you ever wondered who keeps track of the national government programs that work and those that don’t? Once you get past all the groups that claim to monitor the federal programs, there’s the U.S. Office of Management and Budget. Part of its mandate is to review federal programs and, to that end, it has developed the Program Assessment Rating Tool (PART) to help quantify if a program is working. PART can easily answer if a program is working, failing, or not showing any measurable results. From there it can make recommendations on improvements. It’s a nonpartisan tool that works! So why are there so many congressmen ready to ignore it?

The PART questionnaire shows the Federal Family Education Loan Program (FFELP) is performing “adequately.” OK, that’s not great, but it means it is working. It just needs some improvement, a little tweaking. The U.S. Office of Management and Budget has even made some recommendations. One of those recommendations is to increase the benefits to students currently enrolled in school. That seems to make perfect sense since that is part of the program’s directive.

A piece of proposed student loan legislation is currently going through the committee. It says its purpose is to lower interest rates for student borrowers. Unfortunately, it does that only for a handful of students for a limited time while tearing the heart out of the FFELP. This legislation would stop the FFELP lenders from offering incentives to student borrowers. In addition to giving up their ability to give rebates and special interest rate plans, lenders in the FFELP program would be forced to pay higher fees. Fewer tools to attract students and less capital to loan … Why would any lender want to be part of FFELP under those circumstances? Part of the purpose of FFELP is to encourage private lenders to help students. This new student loan legislation doesn’t explain how having fewer lenders would help more students find affordable loans for school.

It makes me wonder if the nice congressmen have even bothered to look at the recommendations before proposing legislation that doesn’t seem to help students at all. So why is the student loan legislation even being considered by Congress?

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

FDLP has cost taxpayers $16 billion dollars since 1998, while the FFELP hasn’t cost taxpayers a dime. Which one sounds more expensive to you? $16Billion compared to 0? Why are politicians continuing to spread word that the Federal Direct Lending Program (FDLP) is cheaper or better or costs less than the Federal Family Education Loan Program (FFELP).

Let’s think about it logically for a moment and look at the facts:

FDLP
Student loan borrowers may be able to save .25% by opting in for auto-debit but the student loan borrower must pay the fees. Also, this program is in a $16 billion deficit, one that will have to be paid out of the taxpayer’s pocket.

FFELP
Student loan borrowers may be able to save up to 2.25% in interest rate reductions AND the lender pays the fees NOT the borrower. Also, the program has been profitable since its inception.

FDLP is the more expensive program, it has cost taxpayers $16 billion dollars, while the FFELP hasn’t cost taxpayers a dime. The FFELP knocks 2.25% off your interest rate and pays origination and other fees, while the FDLP will take only .25% off your rate and passes the fees on to you.

If the Student Loan Legislation passes, borrowers lose. It’s that simple.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

OK, so I’m thinking out loud here, but I want you to come along, because it’s really important.

Earlier this week we compared apples to apples and discovered that it only makes sense to allow the FFELP (Federal Family Education Loan Program) to remain in effect, since it’s obvious that it can “do the job” (it already has, so why fix what’s NOT BROKEN?).

Supporting lunatic legislation that favors the FDLP (Federal Direct Lending Program) makes absolutely no sense, in any way I can fathom. The FDLP inefficiencies are so glaringly obvious to any sane taxpayer who researches the issue, that it should put the issue to rest immediately.

Unfortunately, however, the congressional wolves are leading the student loan sheep astray—those who fail to question the media and buy the political rhetoric being espoused by politicians who are playing for power and position.

I hate to be so direct. On the other hand, why not?

People: It’s time to think for yourselves. How does entrusting almost 100 percent of the student loan volume to the inefficient, ineffective FDLP lead to cutting college costs?

Real simple: It doesn’t. And if you believe anything else, I’m not so sure you belong in college anyway.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

Is the fact that college is so expensive the fault of student lenders?

Of course not. Attempting to connect the two is ridiculous. And if you think about it, it is an insult to the intelligence of any astute, independent individual who endeavors to separate fact from fiction in media.

Yet, this very thing seems to be the justification behind the politicians pushing through the new student loan legislation and their excuse to further regulate the industry, to the detriment of borrowers.

If it’s not broken, why fix it?

So why are our beloved public servants attempting to fix something that isn’t really broken (the student loan industry), instead of going to the source: colleges themselves?

My guess? You can’t build a political platform based on challenging one of the pillars of this great country: the institution of education. And my opinion is, if we want to fix what is broken, we need to start there.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

A tipping point is the moment in time when events that have been gathering momentum produce a toppling or change. More and more in our society “tipping points” are inorganically manufactured by way of the online media and the unabated access people have to information. Now don’t get me wrong; access to information is amazing. As they say, information is power, but what happens to an issue when one group can pay or politic to have their message spread across all media faster than the other side? The other side becomes crippled, and this is what’s happening to the student loan issue.

First proliferated was the news that H.R. 5 was being debated by the House, and the bill promised to cut interest rates on student loans. However, in order to pass the bill during its “First 100 Hours” in session, the House decided to pass the bill with interest rate cuts only on subsidized loans … a far cry from its original offer and surely a move that was orchestrated to give momentum to a new Congress.

Shortly after that the attorney general of New York, Andrew Cuomo, decided to get on the bandwagon and start attacking student loan officers. What can I say about that? Well, should one or two bad apples ruin the entire bunch? What about the good name of all those student loan officers out there who are helping students?

Next, onto the direct mail practices of some student loan companies … why are student loan companies being singled out? Mortgage companies, car insurance companies and a handful of other companies in other financial industries send out similar, if not more aggressive mailers.

Why is this happening? This is happening to manufacture a tipping point. By saturating the media with negative press about the student loan industry, politicians can make the change they want, not the change that is best for the students. They can sell out the students in order to pad their resumes. It’s counterintuitive, I know, but what about all the problems with the Federal Direct Lending Program (FDLP) that aren’t being attacked, such as its deficit or that the program doesn’t address students’ needs? What about the rising cost of education? That isn’t being addressed … the new student loan legislation is nothing more then a political sound bite or a political stepping stone. It’s a mess that the current politicians are creating for taxpayers and for future generations … future generations of politicians and future college students.

We are opposed to the proposed student loan legislation and middle-class families should be too! The government is taking money out of YOUR POCKET.

It only takes one minute to make a difference: call your senators, send your senators an e-mail, download a letter to fax to your senators, become part of our petition and help your friends find out the truth about the proposed student loan legislation.

Just this week I discovered that the federal government due to concerns regarding the student loan industry decided to temporarily lock lenders out of the National Student Loan Data System (NSLDS). This is the tool used by lenders to verify borrowers’ loan information allowing students to get the funds they need.

Let’s first assume that this move is not an attempt to force Federal Family Education Loan Program (FFELP) lenders out of business so that borrowers have no choice but to use the government’s Federal Direct Lending Program (FDLP).

Now, I don’t want to get into any details that are going to make your head spin, but the bottom line here is that this decision will adversely affect borrowers and their ability to get the funds they need for college.

I’ve been hearing a lot of rumors that when students call into loan companies they now have to do the government “hurry up and wait” routine. It now takes them at least twice as long to get the information they need to get their funds. Since they now must jump through an extra hoop of speaking to a government customer service agent at the NSLDS instead of simply accessing the database.

If this is any hint of things to come, we are in for a painful experience, as inept bureaucrats attempt to “reform” the industry by destroying the future of college education and the free-market principles and choices that once drove this great nation.

The politicians are saying that the Federal Direct Lending Program (FDLP) costs less than the Federal Family Education Loan Program (FFELP) and, therefore should be the program that we use exclusively, on the basis of cost alone.

For argument’s sake, let’s assume that these government estimates are correct (though it’s much more than likely they’re not).

As of today, we still have the choice of which program to use and, thus, who covers the costs. If the new student loan legislation passes, we will no longer have that option. In my opinion, it’s a nightmare waiting to happen, and here’s why…

‘Costs?’ Not the right question to be asking
Realistically speaking, the question we should be asking is WHO pays for these programs and what is their track record?

Who pays for the programs?
When a borrower selects an FFELP lender, the lender covers the expense of running the program, as a cost of doing business. A fiscally healthy and responsible lender will make a profit above this cost to stay in business.

When a borrower selects the FDLP, the cost of doing business IS NOT ABSORBED by the FDLP, the Treasury Department or the government. It is passed on to the taxpayer, and is a “hidden cost” that the government sweeps under the carpet. So far the FDLP has a $16 billion tab which will be paid for by taxpayers.

What is their track record?
• As already mentioned, the FDLP is bankrupt and has been insolvent pretty much since the beginning. ($16 billion in deficits to be covered by taxpayers.)

• FFELP lenders have been satisfactorily serving customers for 40 years and have not cost taxpayers a dime.

I think we need to take a stand against the new student loan legislation. If it passes, we will lose thousands in benefits, as well as our right to choose those lenders that have an impressive track record of serving us. Perhaps this sounds funny to you, even contrary to what you’ve been reading lately in the popular media.

But here’s the truth. With the Federal Direct Lending Program (FDLP), YOU, the taxpayer/borrower, are forced to cover the government’s operational costs, marketing expenses, and all associated shortfalls related with that program. (So far that amounts to more than $16 billion).

Alternately, the many millions of borrowers who have taken out billions of dollars worth of loans through a Federal Family Education Loan Program (FFELP) lender have had these expenses picked up by the lender.

This represents millions in savings for borrowers that will disappear if the new student loan legislation passes. So, don’t fall for the party line, and start thinking for yourself. Sign the student loan petition now and save or you may pay for it later …

Sign the Petition

Here’s some food for thought. The U.S. government is dispensing financial advice. At first glance, this may not be all bad. But let’s look at what’s really going on. Recently, the public found out that the government is running a deficit, but not just any small financial shortfall. Try $2.3 trillion. Not million, even billion, but trillion. That’s more than many small countries generate in a year. In my book, we shouldn’t be in business. But let’s put that behind us.

If we are to believe the politicians, they are urging student borrowers to back a program, the Federal Direct Lending Program (FDLP), the government’s own baby, which has been in operation for several years.

Why should we buy this?
On one hand they say that the FDLP is cheaper and better than the Federal Family Education Loan Program (FFELP). The truth is the FDLP has been losing money, almost since it first started. Presently, it’s $16 billion in the whole. If we weren’t using anything but the government’s own creative accounting, by all intents and purposes, the FDLP would be out of business. And rightly so—it should be.

On the other hand, the FFELP has been making money, meeting its demands, and covering its obligations since it started. Not to mention, there are millions of happy, satisfied customers who can point to significant savings as a direct result of being involved with the FFELP.

Can the FDLP say the same thing? Doubtful. Look around. Who is pitching the program besides the politicians and their lobbyists? Honestly, I haven’t heard many testimonials from satisfied FDLP customers. Have you?

Let’s take a walk down logic lane for a moment. The party line parroted by our civil servants is that the government’s Federal Direct Lending Program (FDLP) is cheaper or better or costs less than the private Federal Family Education Loan Program (FFELP). But here’s the real picture:

FDLP
Savings of .25% on interest rate
Fees paid by YOU (borrower)
$16 billion deficit

FFELP
Savings of up to 2.25% on interest rate
Fees covered by lender
Profitable since its inception

In this over simplified comparison, the FDLP is more expensive, costing taxpayers $16 billion dollars so far, while the FFELP hasn’t cost taxpayers a dime. The FFELP knocks 2.25% off your interest rate and pays origination and other fees, while the FDLP will take only .25% off your rate and passes the fees on to you.

If the Student Loan Legislation passes, borrowers lose. It’s that simple.

STOP the College Student Relief Act and related bills NOW!

This legislation STEALS THOUSANDS FROM STUDENTS by imposing a STUDENT LOAN TAX on all federally funded loans including Stafford, PLUS and Consolidation Loans.

We are opposed to this bill because it hurts the people it says it protects… the students!

Save student loan benefits and STOP the STUDENT LOAN TAX.

Call and E-mail Your Senator and Sign Our Petition.

FACT:
This bill is a political gimmick! Nothing more than a “good sound-bite.” It DOES NOT deliver on the promise to save students money.

FACT:
On January 2, 2012, the interest rate returns back to 6.8 percent, making the promised $4,400 in savings is IMPOSSIBLE TO ACHIEVE.

FACT:
80% of America’s colleges and universities chose to work with FFELP because it delivers better service and more choices to their students than the Direct Loan Program.

FACT:
The Direct Lending Program COSTS TAXPAYERS - over $16 billion.

FACT:
Lending Companies give students interest rate reductions -the Direct Loan Program DOES NOT.

FACT:
The Direct Lending Program has ADDED to NATIONAL DEBT - it’s borrowed $105 billion, but has only $89 billion to repay the money.

FACT:
H.R. 5 DOES NOT provide relief to students. Interest rates are for subsidized college loans ONLY.

FACT:
This plan DOES NOT help students go to college, NOT ONE additional student will be able to attend college because of this act.

FACT:
There in NO GUARANTEE that subsidies that HR 5 proposes to stop paying FEELP Loan providers will go back to support scholarships and education.

WE ARE OPPOSED TO THE COLLEGE STUDENT RELIEF ACT AND RELATED BILLS. MIDDLE CLASS FAMILIES SHOULD BE TOO!
The government is taking money out of YOUR POCKET, AGAIN.

Call and E-mail Your Senator and Sign Our Petition.