News
September 22, 2008
harkin floor statement on the ensuring continued access to student loans act
Mr. President, just last week Congress passed a one-year extension of the Department of Education initiative to buy back student loans from lenders who have difficulties accessing capital in the tight financial market. I was pleased to support the extension of this program which has injected more than $1 billion in capital to lenders and has had a hand in ensuring students have access to federally-guaranteed student loans in the 2008-2009 school year.
However, the continued need for the federal government to prop up student lenders, many of which already operate at a profit, concerns me. Companies making loans through the federally guaranteed program already receive generous subsidies and a guarantee of 95% of the value of the loan. While extending the buyback program for another year will provide stability in the student lending market for the 2009-2010 school year, it raises the question of how much federal funding is too much when there is a cheaper alternative that offers the same federal loans to students.
That alternative is the Direct Loan program which issues the same federally-guaranteed student loans without reliance on banks and lenders. In addition to cutting out the middleman, the Direct Loan program is far cheaper for the government to administer. According to the President’s most recent budget, the cost to the taxpayer per loan through the Direct Loan program is $.77 compared to $5.25 through the FFEL program.
Iowa State University, the University of Iowa, University of Northern Iowa, Kirkwood Community College, Des Moines Area Community College, and many other Iowa colleges all issue loans through the Direct Loan program. I continue to hear from students and financial aid administrators at those schools that the program serves them well. An added benefit of the Direct Loan program is that in these troubled economic times students at Direct Loan schools receive their student loans without the worry of whether their lender will be there for them next year. Any college worried about loan availability for their students should immediately sign up for the Direct Loan program.
But the problem is deeper than any one school or lender. As our economy continues to falter and the cost of college rises, we owe it to our young people and their parents to provide student aid that is reliable, efficient and comprehensive. The federal student loan program is one of the best investments our country can make. It should be a priority to provide those loans in the most fiscally responsible way possible.
