Posted by: cslfconnects | May 1, 2009

The Problem with Eliminating the FFELP Program

From the Frying Pan and Into the Fire?

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Carolyn Karno, Manager of Early Awareness & College Planning at the Connecticut Student Loan Foundation, speaks on the problems with eliminating the Federal Family Education Loan program, as suggested under the Obama administration’s changes.

Carolyn discusses how the high-volume end-users, the schools, had the highest exposure to the deficits and limitations of the Direct Loan program, and how after some experimentation with DL, most schools switched back to FFELP. “That should tell you something, ” says Karno. She also addresses what President Obama suggests as the primary driver for the elimination of FFELP – cost savings to be put toward the expansion of the Pell Grant program. “It will come, most likely at the cost to the consumer.” Karno goes on to assert that this is “…not necessarily a win-win situation for students,” and that public school systems that have traditionally relied on the free services in college planning, financial aid training and early awareness will be at serious loss.

As Karno points out, individual students do not save any money by using the government’s Direct Loan program. In addition, when proponents of the Obama administration’s plan trumpet potential future savings, they forget to account for the fact that shifting all student loan business to Direct will also increase the national debt and government spending. Every dollar originated for student loans will either have to be borrowed by the Feds or will have to come from The Treasury. Thus, spending on loans for higher education will shift from the private market to consumers, increasing individual tax burden and possibly contributing to later inflation. For more information on preserving student choice, please go to http://www.keepstudentloanslocal.org.

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