Posted by: cslfconnects | April 18, 2009

Preserve student choice – Keep student loans local – Save FFELP!


Upcoming Obama administration budget proposals threaten local student loan providers, put jobs in peril, end relationships with high schools receiving free college access services, and potentially disrupt how post-secondary institutions schools deliver Financial Aid.

Read on to understand the scope of the disruption, who will be hardest hit, and whom to contact with your concern. 


The Administration’s budget proposes an abrupt and potentially destabilizing departure in how student loans are financed and delivered to millions of students and schools each year.  In order to ensure full debate of this proposal, it is vital that Congress not lock this policy into the budget resolution by including reconciliation instructions designed to force action on the student loan proposal in the conference report.

  • Although the Administration and the Congressional Budget Office claim the transition to Direct Loans (or a fully nationalized student loan program) will achieve significant savings, these projections do not take into account the costs of servicing and administering these long-term loans over their entire life. The projections also rely heavily on the assumption that the Treasury will continue to be able to borrow long-term at low rates from foreign governments, even as U.S. government debt issuance reaches unprecedented new heights.
  • Roughly 35,000 student loan industry jobs would be lost all over the nation. Although some private-sector role would be maintained in the servicing of DL loans, recent Department of Education contracting practice indicates that only a few national servicers would be selected. This plan means the overwhelming majority of employers in the student loan industry would be forced to make huge cutbacks in staffing and that the highly regarded localized services currently provided in the FFELP would be lost.
  • Most of the existing college outreach and access programs conducted by FFELP participants would no longer be economically viable. Millions of students and families, especially first-generation students and under-represented minorities, have benefited from these programs.
  • Reconciliation is included in the House budget resolution but not the Senate budget resolution. House and Senate conferees will be working out the differences between the two versions over the next couple of weeks.
  • The Administration budget proposes to replace the Federal Family Education Loan Program (FFELP) – a successful 40-year public-private partnership that provides post-secondary education access to millions of Americans each year by leveraging private-sector capital – with the Federal Direct Loan Program (DL). This would require the U.S. government to issue roughly one-half trillion dollars in new Treasury debt over five years to raise funds to originate all federal student loans.
  • A healthy public debate would reveal the full benefits of the FFELP and the full cost of direct lending. It’s incumbent upon Congress to explore alternative policy prescriptions. To ensure a permanently sustainable source of private capital for student loans into the future, loan providers are developing proposals for policymakers that involve the use of market mechanisms and a simplified loan delivery system.
  • The two-thirds of all American post-secondary education institutions that currently participate in the FFELP because they find it a more efficient and effective source of borrowing for their students would be mandated to enlist in DL and required to change their operating systems to accommodate DL.
  • Despite the capital markets crisis, the FFELP has continued to supply every eligible borrower with a student loan. This remarkable result, achieved in part with temporary assistance from the federal government that doesn’t cost the taxpayer a dime, stands in contrast to the collapse of other lending markets. Permanent nationalization of student lending is not required to respond to the current temporary financial crisis.

Most Americans agree that government programs work best in partnership with the private sector, and that competition drives price and quality.  Most would also agree that even small government agencies can suffer from too much bureaucracy and too little quality control.  Help us to help you or your student by keeping student loans local to Connecticut as much as possible.

If you wish to get in contact with your representative now, feel free to use the links and phone numbers below. Or, see our “Virtual Hill Day” post, with instructions, a brief script and ideas about timing for maximum effect!

Find your representative here:

Connecticut Senators:

Christopher Dodd (202)224-2823

To email from the web:

Joseph Lieberman (202)224-4041

To email from the web:

What else you can do:

Use your social networks and word of mouth to spread the word to other supporters of our services and the FFELP program, and have them contact their Representatives and Senators to voice their support!

Find us on Facebook here:

And on MySpace here:



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