I am sorry I could not remain on hold last evening when I called into the radio show, but I want to be sure to provide these important facts to you and your listeners. I am the caller who has been in the student loan industry for over twenty years. The comments made by Rep Fatah regarding the student loan industry, yesterday, were misleading and clearly incorrect.

These are the FACTS:
The Federal government will not be saving billions by elimating the FFELP. They are more inefficient, and ill-prepared to manage the significant mangerial and risk issues related to this inductry. That’s why FFELP worked so well for so long.

They will not eliminate the middleman, they will need to originate, disburse (however more inefficiently) just as the “middleman” has to today.

They will not generate savings by changing the middleman as the government pays for similar functions at least $15,000 more per year and offers medical and retirement packages we do not have in the private sector. At the high levels the discrepancies are greater.

Regarding federal “subsidies”. Your listeners should know a subsidy is only paid to a lender who is participating in the FFELP program and under the rules of the Dept. of Ed when and ONLY when the rate of the loan (Stafford or PLUS) established by the Dept of Ed is HIGHER than the cost of funds rate. This was established by the government to insure they maintain total control of price.

The private sector has provided origination, disbursment and servicing effciencies over that past twenty years which had enabled us to offer discounts to parents and student on these loan. This practice was fround upon by the government. The government was either unwilling or unable to follow suit either because of their high internal cost and inefficiencies or lack of addtioanl taxpayer $ to do so. In the last few years the government has been making it harder and harder for schools turn away fro Direct Lending. Even before it has been voted on Arne Duncan sent a letter to all colleges and universities advising they need to convert to DL as FFELP will be going away.

The saddest part of this whole cost of education hyprocracy is the government gave birth and continues to feed the bloated pig. The bloated pig is the cost of higher education. The mind set has been for years to wait and see how much the government will permit in federal grants and loans and tuition is increased accordingly. In a free market, the cost would be based on supply and demand. The waste found throughout so many campus’s would be contained as they would have to manage to maintain their standards to insure they can attrack students. Young people with no interest in education wouldn’t just show up at college to take up space as they do now. There is at least 10%-15% of the student poulation in most colleges today that enroll because they get it for free and barely show up. Addtionally, because of the way the government system is designed to help these individuals in addtion to fully paid tuition, they also receive living expenses complients of the taxpayer. The schools are trilled to support these applicants; they are paid in full and well to have them in attendance.

I hope this provides a clear view of the direction Mr. Obama is taking the country.

Thank You,
Joanna