I’m not talking about the mega-lenders, although they will also be affected. I’m talking about the thousands of small lenders who brought innovations, creative lending packages and earnest competition to the student loan lending industry. I’m talking about the local lenders, the non-profit loan lenders and servicers, the private companies who developed programs to help student borrowers avoid default, build good credit ratings and manage their finances responsibly.

There are more than 3,500 FFELP lenders in this country. If each of those lenders laid off only three people, that’s still a better than 10,000-job loss. And for what benefit?

The Congressional Research Service estimated that very few students would actually benefit from these drastic changes to the student loan program. The interest rate cuts, even at 50 percent, will save the average student $18 per month. The average annual increase to the Pell Grants is only a couple hundred dollars and most students don’t qualify for Pell Grants in the first place. This ridiculous “relief” is supposed to benefit students? Come one! Do the people in Washington understand that a single college text book can cost more than $150, let alone the annual double-digit and near double-digit increases in tuition? What is $200 per year supposed to do?

What happens when that $11.4 billion has to stretch across more students? Congress hasn’t done anyone any favors with this measure. Remember that in the 2008, 2010 and 2012 elections. The cost of higher education is spiraling out of control. There’s no end in sight and despite the best intentions of people who really want what’s best for students, many students will be closed out of our institutions of higher learning. Congress has done nothing to curb the tuition increases that our colleges and universities are passing on to students.

Congress is offering water to students who are drowning in the costs of higher education. Killing the FFELP won’t solve the problems students face. It won’t lessen the burden of paying for higher education. It won’t even make a dent. The mechanisms that students use to pay for college aren’t the problem, and they never have been. The grossly high cost of tuition is the problem. It has always been the problem and it will always be the problem until someone does something to stop the tuition increases.

Since the program’s inception, the college graduation rate has tripled, and many people who would not have gone to college got the opportunity to pursue their dreams. The value of a college education is indisputable. People who graduate from college make more money than people who don’t. It’s just that simple. We’re not talking about a few bucks, either. We’re talking, on average, of $1.2 million more in lifetime earnings for college graduates than for those who don’t go to college.

That $1.2 million is income on which taxes are paid. It’s income that people use to buy houses and cars, travel, pay for their children’s education, and save for retirement. A college degree pays dividends long after the student loans that funded it have been repaid. This is especially true for students from lower- and middle-income families, for whom a college education is not a guaranteed thing.

Since the mid-60’s, the FFELP program has been in place to ensure that students made it through college and were given the chance to contribute meaningfully to society and to share in the prosperity that a college degree offered. More students than ever before are expected in our nation’s colleges and universities in the next ten years. Unfortunately, they’re not the trust-fund types that come prepared to pay out of pocket. They’re the students that President Johnson was trying to help with the FFEL program.

Congress has just issued the most striking blow to that program, and in the process, has jeopardized the educational well being of millions of American students who are not even old enough to enter college yet. The opportunity for those students to get through college has been struck down, and they don’t even realize it.

The cost of higher education is crippling and Congress has done absolutely nothing to change that. Forty-two years ago, President Johnson recognized that the cost of education was a barrier to entry. Well, the barrier still exists. Tuition rates are skyrocketing and Congress hasn’t done anything to solve the real problem. Now, Congress’ commitment to helping students overcome the barriers to entry is wavering. With more after-tax incentives to save for college, and fewer opportunities to pay for college, Congress is washing its hands of the whole question of exorbitant tuition increases. The bottom line for most American families is that if you haven’t saved enough for college, under this legislation, there’s a good chance you won’t be going.

This legislation jeopardizes the sale of Sallie Mae, the largest student loan lender in the industry. The company is in the middle of a sale to a private equity firm, and the sale was originally to conclude in October. What this means for you, the taxpayer, is that suddenly, Sallie Mae isn’t so attractive anymore. Since the Federal government backs Sallie Mae’s loans, you could be picking up the bill for some of Sallie Mae’s lending, if things don’t work out right.

This legislation reduces the amount of money the Feds spend on debt collection. This is a bad sign. The Feds already have a high default rate in their own program, - it currently approaches 25 percent. We have recently seen stories of the amount of money the Canadian government spends to collect on defaulted student loans for their government-run student loan program. It exceeds the amount of money that program makes on the interest. By decreasing the funds available for collection activities, the Congressional Democrats are throwing in the towel before the plan even starts moving. They’re willing to “accept” the costs of writing off a certain amount of default debt. That’s easy for them to do; they’re not losing their money. They’re losing yours! Instead of being diligent with your money, as the FFELP lenders have been, they’re throwing it away. That’s typical of Congress and you should expect more of the same in the coming years.

The legislation is unstable and it provides an interest rate cut for just four years. The next re-authorization will take place as the country is beginning to gear up for the next election cycle. This approach isn’t doing the taxpayers or student loan borrowers any favors. Congressional Democrats have layered into the program a structural instability that guarantees change every four years. If Congress is sleeping, which is entirely possible, as we’ve seen in the past, your interest rates could shoot up unexpectedly.

On the other hand, experts agree that low interest rates, which don’t really address the issue of the cost of higher education, aren’t really the best mechanism to reducing the cost of a college education. Four years from now, you could get stuck with another round of policy failure based on low interest rates on student loans, when that strategy does nothing positive in the long-term.

The interest rate cut is halved, but it’s only good for (surprise!) four years. You get to go through this garbage again during the next Presidential election. The Democrats have thoroughly politicized the student loan process, so you can count on this kind of instability for future election cycles.

The system of auctions has been foisted upon your parents. They’re the ones who get to collect lenders instead of you. Maybe Senator Kennedy should print up lender trading cards to help your folks keep track of the Lender du Jour.

Lender loan origination fees, which had been 0.5% are doubling. Those are the origination fees that many lenders used to waive. Well, start your wallets, kids, because they’re going up, and you’re going to be paying for them. This is exactly what I’ve predicted. The Feds will be shoving off all of their administrative costs to you, the borrower. Going to college is going to be much more expensive from now on. If you haven’t prepared well, Senator Kennedy’s “subsidies cut” is going to come as a rude surprise. He’s not cutting the lenders’ subsidies. He’s cutting yours.

This kind of legislation is irresponsible. The Congressional Democrats used a bazooka to swat a fly. No one is saying that the student loan industry could have used reform. What industry can’t? But there were many mechanisms available to solve the real problems without resorting to the near-complete devastation of the entire industry.

In the end, it’s you, the borrower and you, the taxpayer who will be held responsible for the Congressional Democrats’ mistakes. Prepare yourselves for the next four years because it’s going to be a rough ride. Remember this as you work your way through this system, and don’t forget to vote in 2012.

Things don’t look so good for you the borrower, because thee Congressional Democrats want to cut about $20 billion in student loan subsidies to FFELP lenders. This isn’t the $20 billion that lines the pockets of dishonest and greedy FFELP lenders. This is the $20 billion that pays for your student loan origination fee waivers, your interest rate cuts, your incentives for on-time payment histories, your competitive interest rate cuts, your borrower education and default avoidance programs and all of the other “amenities” the FFELP lenders provide to borrowers. You won’t be getting those from the FDLP program. Those will be coming out of your pocket.

Don’t think for a minute that this legislation won’t affect you. It will. You, the taxpayer, can’t escape the impact of a Federal program cut of 75 percent or more, especially when the government wants to continue the program without paying for it. You will be expected to pay for your student loan twice – once through direct repayment of the money you borrowed, and again to repay the money the Feds borrowed to lend to you in the first place. How is that fair and equitable? It’s not!

Things don’t look so good for the FFELP lenders who have participated in the program for years. Everything you thought you knew about student loans will change. The rules will be very different than what you thought you were going to have and you won’t always be able to rely on student loans to help you through college.

Things don’t look so good for your parents, who may have planned to borrow funds to get you through college. They’re going to be stuck with the same mess you are. They’ll pay for your loans twice … maybe three times. Once, when they borrow for your education’ a second time as their tax dollars go to work paying off the money the Feds borrowed to lend to them for your benefits, and a third time, if they also borrow against their retirement savings to pay for your education. They may have to delay their retirement plans while at the same time, they’ll risk losing their retirement funds altogether if something unfortunate happens to one of them before they can get your student loans repaid.

As I said, things don’t look so good.

Why should Congress care about that? Well, the Feds back Sallie Mae’s student loans. If the sale doesn’t go through, or something really unfortunate happens to Sallie Mae, or the new buyer can’t make ends meet as the result of Congress’ new and improved interest rates, the Feds are going to be on the hook for all of Sallie Mae’s student loans.

As it turns out, student loan lending doesn’t really have the fat profit margins in it that the Democrats have been screaming about. In truth, the margins are pretty thin. Thin enough that a 50% interest rate reduction would make student loan lenders like Sallie Mae unattractive, or worse, unable to stay in the business of student loan lending.

This is a classic example of the Congressional Democrats’ uncanny ability to act before they have all of the facts. The 50% rate cut isn’t possible without bringing down the entire student loan lending industry and costing the government billions of dollars. The bottom line for all of you student borrowers out there is that there’s no way for Pelosi and Co., to come out ahead on the interest rate cut, so the Congressional Two-Step begins. It’s interesting to watch how try to they extract themselves from the undeliverable promises they made to you, the students.

In the end, they’ll hold the interest rates constant. You won’t get a rate cut at all. Congress doesn’t really care about the interest rate on student loans, and you? Well, you’ll get over it, right? After all, what’s a broken promise or two between a Congressional Representative and his or her constituents? What Congress is really after is the subsidies they pay to FFELP lenders right now.

If you follow the money, you’ll find that the subsidies that Congress pays to the FFELP lenders don’t go toward those lenders’ bottom lines. They go to you, the borrowers. They pay for loan origination fees, interest rate cuts, debt forgiveness, and education programs designed to help you. Sure, the student loan lenders could pocket the money, but they don’t. Why? Because they understand that the long-term viability of the program depends on them being responsible stewards of the government’s money; distributing the benefits to students; and engaging in healthy competition that benefits the borrower, the lender, and society in general.

When Congress proposes to cut the subsidies they pay to FFELP lenders, they’re really proposing to cut the subsidies the student loan lenders pass along to you. You’re the one who loses in this deal.

It’s ironic, really. The only federally funded student loan program in which students don’t have a choice of lender is the FDLP. Yes, that’s right. FDLP participants don’t have a choice of lender. Congress wants to put all student borrowers into the FDLP, thereby eliminating choice from student loan lending altogether. Congress complains that students may not be fully aware of their lending choices in the FFELP, and yet, choice is exactly what gets extinguished under the Congressional Democrats’ plan.

Why is lending choice so important? When students choose among many lenders, they strengthen the FFEL program. If a borrower can choose among lenders, the borrower can go anywhere. If one lender offers a better deal, fewer fees, or better interest rates, the borrower wins. On the other hand, when choice is stifled and competition is eliminated, borrowers have no choice and cannot find the terms that best meet their needs. Lenders don’t need to compete, so they can impose whatever terms they like. Without competition, borrowers lose.

The government wants to force borrowers into programs that are designed to turn student loans into losing propositions. The borrower loses. The lender loses. The universities and colleges lose. Millions of middle class American families lose. The country loses.

Why does Congress want to switch successful student loan lending programs into loser mode? Congress doesn’t really want to back your student loans anymore, and it’s easier to cut support for higher education funding when Congress has more control over the program. Student financial aid comprises a large chunk of the Federal government’s budget each year. Without meaningful cost controls on the rise in tuition, the only thing Congress can control is what portion of your education they subsidize.

Congress wants to send a message to American families, which is “Don’t look to us for help with college funding anymore.” Unfortunately, it will take years for American families to prepare to cover the outrageous cost of higher education. In the mean time, they’re using current college students as political pawns by promising lower interest rates and other “benefits” they have no intention to deliver.

What’s with the sale of all of these student loans? It seems that the state government in Illinois found it burdensome to service all of these student loans. It’s become too risky for the state to continue to hold these loans, so off they go. (Risk, in this case, has as much to do with the upcoming election cycle as it does with the general state of the economy.) This is another great illustration of why governments should not be in the business of lending. Their tolerance for risk is low, and what they perceive as risk is colored by which way the political winds are blowing.

That really has no place in professional lending. Lending should be left to lenders. Lenders understand the risks when they make the loans, and understand how to help borrowers perform according to the loan terms. FFELP lenders have worked with their borrowers and with the colleges and universities to develop programs that mitigate the risk. In mitigating risk, the FFELP lenders can make loans to “risky” borrowers. The FFELP’s programs transform “risky” loans into performing loans by working to eliminate the causes of default. Government lenders simply run and hide, or take the loss and pass the costs back to the taxpayers.

So the ISAC sells most of its loan portfolios, and destabilizes the services it has provided to student borrowers. It minimizes the services it can offer to the borrowers in its remaining portfolio. To make matters worse, the student loans sold by ISAC were sold at a much smaller premium than the initial sales in January.

The overall effect for the borrowers is that they now deal with a new loan servicer – one they’ve probably never heard of. The companies that purchased the loans are probably OK to deal with, but if they aren’t, at least the borrower has options, right? Maybe not. Under the old rules, these borrowers would have the opportunity to move their student loans to a servicer of their choice by consolidating their loans with a different lender. Student loan consolidations are going to be pretty hard to come by, and lenders will have little or no incentive to assist students who are looking to consolidate student loans.

This kind of instability is exactly why governmental agencies should be in the lending business. No matter where their heart is, they aren’t lenders. They’re subject to political machinations that can change on a daily basis. Borrowers need stability. Tell your Congressional Representatives that you don’t want the student loan system dismantled. You want stability in lending and loan servicing, such as what you get with FFELP lenders.

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.

Congress’ new plan to fund higher education is going to change all of that. It’s not clear that the new plan is adequately funded to accommodate the expected increase of students in the next ten years. The program that Congress is pushing is already in the hole by more than $16 billion and is hemorrhaging money right and left.

The funding for student loans is not guaranteed. Congress can re-allocate that money any time it chooses to and for any reason, with or without notice. If the funding priorities change in Washington, millions of American college students could kiss their funding goodbye.

Worse, the new program eliminates most current lenders, and makes staying in the program so unattractive that even those lenders that can afford to stay in the program will choose not to. Congress is under funding student financial aid, and has been doing so for many years. Under the new program, they’ll also be cutting off the option that many students have turned to in order to compensate for Congress’ reduced commitment to funding student financial aid.

Make no mistake about it. You will have far fewer options to fund a college education, thanks to this new legislation. The mechanism that you thought you could count on is going to be taken away. In the process, Congress has jeopardized the future of many promising students, and will consign many of them to lives of poverty and struggle.

When higher education isn’t available to most prospective students because they lack a credible funding mechanism to finance their goals, you’ll have Senator Kennedy and the Congressional Democrats to thank. Just remember, they don’t care about how you’re planning to get through college, or whether you have enough funding. If they did, they wouldn’t have let the Federal financial aid caps rot in place for so long.

Tell your representatives in Congress that you want stable, equitable and accessible funding for higher education, like that which is available through the FFELP lenders.