Counterpoint: Lenders Respond
The final report of Education Secretary Margaret Spellings’s Commission on the Future of Higher Education, released late last month, is already generating a strong debate, including a column by Senator Edward M. Kennedy.
The Spellings commission and Senator Kennedy are right about the need for increased federal support for higher education. Achieving “a higher education system that is accessible to all qualified students in all life stages,” a Commission goal we all share, will require new and significant federal investments in both need-based grant aid and low-cost student loans.
The reasons are largely demographic. The largest secondary school classes in history are graduating over the next few years. Equally important, the growing diversity of secondary school graduates creates challenges; there are cultural and information barriers that need to be addressed.
Senator Kennedy is correct in pointing out that the federal student loan programs are the single largest source of financial aid, making them an essential component of any plan to increase the accessibility and affordability of postsecondary education.
So while America’s Student Loan Providers agrees that “every student in the nation should have the opportunity to pursue postsecondary education,” we do not believe that this shared policy goal can or should be achieved by eliminating the guaranteed loan program, as the senator suggests. This would jeopardize the fulfillment of educational goals for the millions of students and 6,000 colleges, universities and technical schools that rely on guaranteed loans.
Such a one-size-fits-all government solution wouldn’t be good for students, parents or schools. Nor is it good policy.
Indeed, it is the public-private partnership of the guaranteed loan program that will make $56 billion available to nearly 7 million students and parents this year alone.
Equally troubling is the assertion that the program is without risk to lenders and other guaranteed student loan participants and that it somehow encourages students to default on their loans. When a student is unable to repay his or her loans and goes into default, it harms the student, the lender, and the taxpayer. That’s why student loan providers have implemented innovative strategies to assist borrowers in understanding and meeting their repayment obligations, and that’s why student loan default rates today remain near the lowest level in history.
Finally, it is widely recognized that the federal methodology used to calculate program costs overstates the cost of the guaranteed loan program and understates the cost of the direct loan program. Other analyses conclude that costs of the two programs are either virtually identical or that the guaranteed loan program is less expensive. The point is that major decisions about the future of the loan program that millions of students depend on shouldn’t be based solely on questionable cost assumptions.
For 41 years, the guaranteed loan program has helped make postsecondary education possible for millions of Americans. One of the original Great Society programs, it has been hailed by Democrats and Republicans alike. It’s one reason why a 2000 Brookings Institution study called increased access to postsecondary education one of the federal government’s most significant accomplishments.
Clearly, this is one government program that is deserving of support. We welcome the opportunity to work with the Congress and administration for the benefit of those seeking educational advancement.