Financial Aid Officials: Cuts to Private Sector Student Lending Program Will Increase Cost of Attendance and Reduce Services

RESTON, Va., Feb. 8 /PRNewswire-FirstCall/ -- In response to proposals in Washington to cut the private sector student lending program, financial aid administrators at colleges and universities across the country are voicing their support of the Federal Family Education Loan Program (FFELP). The FFELP currently serves 80 percent of all students who borrow to pay for college and plays a crucial role in the delivery of aid and benefits to students and parents.

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Financial aid administrators and school officials expressed concern that the proposed cuts will significantly increase the cost of college for students and families, greatly diminish services, and will dramatically reduce competition by squeezing many student loan providers out of the market. School officials are also worried that cuts to the FFELP will limit choice and force colleges and universities to participate in the cumbersome and costly government run student loan program (Direct Lending) that has already cost students, families and taxpayers billions.

Financial aid and school officials have spoken out in support of the FFELP and called on Congress to support the private sector:

"I am convinced by both my personal experience with the FFELP and Direct Loan programs and my professional experience that FFELP is better. It's better for taxpayers. It's better for borrowers. It's better for schools. It's better because lender competition translates to better rates and savings for borrowers, a stronger economy and more people in the job market." Elizabeth A. Casale, Financial Aid Director Carnegie Mellon University Pittsburgh, Pa. "I believe that aid professionals are able to offer better services and guidance to their students through the FFELP community." Karen M. Flynn, Director of Financial Aid University of New Haven West Haven, Conn. "One of the best resources available to students has been the Federal Family Education Loan Program. Through private enterprise, the ability to apply for and receive federal loan funds has been made easier than at any time in history." Kenn Posey, Director of Student Aid and Scholarships Louisiana State University at Alexandria Alexandria, La. "By allowing for multiple student loan programs, students and families are allowed to benefit and receive the services, borrower benefits and technology which is most beneficial to our school's population." Heather K. Hamilton, Director Graduate Financial Aid Quinnipiac University Hamden, Conn. "Through my experience as a financial aid administrator, I have seen how students have been provided a better deal because of FFELP. The benefits to the borrowers have increased due to competition and choice, which in turn has produced drastic improvements in default management, efficiency and service." Lawrence D. Earle, President Career Point Institute San Antonio, Texas "I have worked with both FFELP and Direct Loan programs and feel that the FFELP services to students and schools far exceed those that can currently be provided by the Department of Education. I am fully in favor of improving our processes but I can envision no favorable outcome by dismantling the FFELP program." Toni Bryant, Financial Aid Administrator Schreiner University Kerrville, Texas Since 1965, private sector lenders have helped 50 million Americans pay for college." David Allen, Director of Financial Aid Bristol Community College New Bedford, Mass. "We support the efforts of Congress to make college more accessible and affordable, including making the rate on student loans as low as possible. We do not support paying for these efforts by cutting the very program that provides this aid, the Federal Family Education Loan Program." Erin Chiaro, Director of Financial Aid Fairfield University Fairfield, Conn.

These comments are consistent with those made by colleges and universities in the past:

" ... FFELP has a larger customer service area, more default aversion options and web-based servicing access available to the school as well as the borrower. The competition among the private lenders has provided savings and other benefits to parents and students that Direct Lending cannot match." Alan G. Merten, President George Mason University Fairfax, Va. Testimony to Congressional Hearing on Government Reform (May 26, 2005) "We at Ohio State believe both FFELP and DL working together have resulted in the most effective and efficient improvements in the financial aid system. While we remain steadfastly a DL school, we encourage continuation of FFELP as well as DL, as competition makes both programs more receptive to students' needs." Natala K. (Tally) Hart, Director, Student Financial Aid The Ohio State University Columbus, Ohio Testimony to Congressional Hearing on Government Reform (May 26, 2005) "We do not want to deny our students the right to choose a lender. The FFELP program affords us that opportunity by offering a variety of lending options with competitive lending fees and flexible repayment terms, and value added services ... We cannot lose the balance of access, affordability, and choice. Financial aid becomes a less effectual program if we take away choice." Sarah Bauder, Director of Financial Aid University of Maryland, College Park College Park, Md. Testimony to Congressional Hearing on Government Reform (May 26, 2005) " ... Having participated in both student loan programs, in my opinion, the benefits of FFELP outweigh those in FDLP ... Private lenders offer loan programs that are seamless for students, parents, lenders, guarantors and the financial aid staff ... National student loan default rates are lower than ever before because competition between the programs prompted programmatic changes and lenders are offering more assistance to schools to reduce loan defaults. Families are able to take advantage of affordable tuition payment plans offered by private lenders. Additionally, private lenders are offering services to assist schools with improving retention and graduation rates. The return of a portion of their subsidies in the form of scholarships and other value-added services improves the access and equality to higher education for many families." Cynthia Thornton, Director of Financial Aid Dillard University New Orleans, La. Testimony to Congressional Hearing on Government Reform (May 26, 2005) "The current choice between these two similar but different programs offers the best of both worlds. On one hand, FFEL is a well-regulated, private-capital-funded student loan program that can help drive technological innovation and improved customer service, and ensure that the DL program does not degenerate into a minimal-service-level government bureaucracy. On the other hand, Direct Loans, a federally capitalized program -- as long as it receives sufficient federal money to provide reasonably competitive types and levels of borrower benefits and to invest in administrative improvements -- can stimulate the privately-funded FFEL program to continue to push down its overhead costs and increase its service quality and borrower benefits." Nancy Coolidge, Coordinator, Student Financial Support University of California, Office of the President Oakland, Calif. Testimony to Congressional Hearing on Government Reform (May 26, 2005)

This represents only a sample of the college and university representatives who have commented on the benefits of the private sector student lending program.

SLM Corporation , commonly known as Sallie Mae, is the nation's leading provider of saving- and paying-for-college programs. The company manages $142 billion in education loans and serves nearly 10 million student and parent customers. Through its Upromise affiliates, the company also manages $15 billion in 529 college-savings plans, and assists more than 7.5 million members with automatic savings through rebates on everyday purchases. Sallie Mae and its subsidiaries offer debt management services as well as business and technical products to a range of business clients, including higher education institutions, student loan guarantors, and state and federal agencies. More information is available at http://www.salliemae.com/. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.