Recently I came across this petition from the Consumer Bankers Association: “Petition for Choice and Competition in Federal Student Loans.” The concept is simple, do you want choice in your student loan options or do you think the government can manage a direct lending program that will ultimately have greater benefit to students and their families? The current plan would eliminate the Federal Family Education Loan Program, effective July 1, 2010. This program would be replaced by the proposed Federal Direct Loan Program.
Without imposing too much in way of my personal political views, I think this petition makes a lot of sense. More choice means more competition which should mean lower loan costs for students and their families. If a particular source of loans has interest rates that are high, the consumer can select a loan from someone else. Never mind having multiple options for payment terms based on what the needs are of the individual student and their situation.
The author fails to mention that switching to the direct loan program will save taxpayers $94 billion over ten years, and that these funds will be used to expand and reform student aid programs like the Pell Grant.
The Consumer Bankers Association has been spreading disinformation to derail the proposal, which would help students but hurt their members’ bottom lines. You can find the truth about these proposals here:
http://www.niemanwatchdog.org/index.cfm?fuseaction=ask_this.view&askthisid=00404