Oppose Elimination of Federal Family Education Loan Program (FFELP)

Sent to Congresswoman Melissa Bean, Senator Dick Durbin, President Obama

Dear Congresswoman Bean,

I am greatly concerned about President Obama’s outlined elimination of the Federal Family Education Loan Program (FFELP) program within the budget proposal he unveiled today.

I share the belief of President Obama, you and many members of congress and the current administration. There are few priorities more important that improving our education systems and assuring that more of our citizens complete higher levels of education.

The current cost of a college degree and other secondary education programs force many students and families to secure student loans, Plus loans and other financing. What is the best way to improve the loan system, reduce costs if possible and assure that financing is available to fund this critical need? This is a vital question.

I do not have the innate aversion to government that many on the right side of our political spectrum seem to. Government—federal, state and local—have their places. However government, by design, is bureaucratic and is generally not all that efficient at the administration of large programs. Our federal government does not have competitive pressures forcing efficiencies like the private sector does. In addition, at times, political factors can and do impair efficiency improvements.

From my understanding of President Obama’s position, the elimination of the FFELP program would have the following adverse effects:

1. Elimination of student/family choice—there will be only one viable resource for student loans—the federal government.

2. Colleges and universities have not embraced the Direct Lending (DL) program as it exists today due to terrible customer service, bureaucratic problems and other implementation issues. The contractor, ACS, currently handling administration for the Direct Lending program has caused horrendous quality control and customer service issues. From what I understand, they won the contract in large part due to being the lowest bidder. My hunch is that they probably cut deeply into their service capabilities in order to afford this low bid. In fact, few years ago the government fined them $2 million for not meeting minimum standards and private institutions have pulled contracts from them due to horrific quality levels.

3. Bureaucratic mistakes relating to loans can have terrible consequences for an individual’s credit. I believe that we can ill-afford this risk.

4. FFELP is “stable” business for a banking sector in crisis. Pulling this business from the industry would help to undermine the current efforts to stabilize the banking sector.

5. The current crisis aside, the responsible members of the banking sector have historically been quite proficient at the innovation of new systems, solutions and products. Our government, due to necessary checks, balances and compromises, moves much slower and end results are often watered down. We call ill-afford the slightest risk that solutions for funding the education of our citizens will be watered down.

6. There have been FFLEP program abuses amongst a small minority of the banking community. Although the total of these abuses were not great in comparative monetary value, they were catastrophic in political damage. These abuses make it very difficult for you or other members of congress to support the current public/private system. It will take political courage for you to oppose the dismemberment of the program, but I urge you to muster this courage. We cannot forget that government is far from immune to waste and abuse either—as citizens of Illinois; this is a very embarrassing reality. Abuses within either the public or private sectors cannot be tolerated, but we must implement the best solutions, not the most politically convenient solutions.

7. Independent studies have virtually eliminated the argument that the Direct Lending program is less costly to administer. In fact, it may be more costly. From the evidence, it seems reasonable to conclude that from a cost standpoint FFLEP and DL are pretty even. Therefore, the primary questions are ones of customer service and quality of program implementation/administration.

The banking sector is in crisis, yes. Some members of the banking and mortgage industries were irresponsible and our entire citizenry is paying a severe price.

However, I do not believe that elimination of the private banking sector from the important work of funding higher level education for our citizens is the answer.

Although it is currently popular to demonize the banking sector (and some institutions deserve it) I urge you to muster the political courage it will take to probe this important issue and to challenge the private banking sector to come to the table with solutions to improve student loan programs and implementation of the programs.

With deepest thanks for your service to our state and to our nation,

Tonia Becker VerShaw
Grayslake, IL