Competitive Student Loans

Re “Helping Students, Not Lenders” (editorial, March 4):

While you praise the proposal to eliminate the Federal Family Education Loan Program, you do not factor in the choice and valuable services offered to student borrowers that are a product of the competition between the Federal Family Education Loan Program and the government’s direct loan program. The nationalization of student lending would eliminate those benefits and hurt the very students the proposal intends to help.

The claim that the direct loan program is “less expensive” is tenuous at best, as originating all loans through the direct loan program during the next five years would require roughly $500 billion in new Treasury borrowing.

In the end, we’re confident that federal policy makers will closely scrutinize this proposal, as well as potential alternatives, before terminating a successful 40-year-old program with proven results in providing college access and opportunity for millions of students.

Peter Warren 

President, Education Finance Council

Washington, March 5, 2009

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To the Editor:

Why do you not support free-market principles in student loans with the same tenacity that you support them in other areas? You endorse a proposal by the Obama administration to abolish guaranteed loans, thereby eliminating all consumer choice and competition in federal student loans.

In an editorial about the airline industry in 2007, you wrote that the government “could have gone further and opened up the American market to more competition, and the superior service and lower prices that come with it.” You also said, “We hope that politicians will embrace the free-market principles they so frequently tout.”

Your support of a government monopoly in student loans — which could eventually have the Department of Education managing $1 trillion in loans — is irreconcilable with your embrace of competition elsewhere.

Competition in student loans has created significant consumer benefits: free delinquency and default prevention services, increasingly important in this economy, as well as better terms, college access programs and consumer-friendly processes.

http://www.nytimes.com