Submitted by Interested Observer (not verified) on May 23, 2008 - 8:22am.
It is extraordinary that there has been only one consistent voice stating that the credit markets have not threatened the availability of student loans. There always seems to be a naysayer and this blog has certainly filled that roll. Too bad that virtually no one agrees with you, even those who have been critics of the FFELP in the past. From Congressman George Miller, chairman of the House Education and Labor Committee: "The proposed actions outlined by the Department reflect a thoughtful approach to implementing a key provision in our legislation to address the liquidity issues facing some lenders, at no additional cost to taxpayers." Was he among those who were duped as you imply? Was he a victim of a cynical game of chicken on the part of lenders? Or is there perhaps a simpler answer? Perhaps, Chairman Miller reached out to experts across the field of student loan finance, informed himself of the situation, held a well-timed hearing on the issue, responded appropriately, and urged quick action by the Department of Education. When the Department announced their measured plan this week, Chairman Miller praised it. Perhaps, too, there are those who get the math and understand the program better than it appears in this post. For example, the "trust" available at commercial paper plus 50 basis points in only for 15 months, during which time virtually all of the loans will be in school, earning commercial paper plus 119 basis points (not the higher 179 basis points when the borrower goes into repayment). The remaining margin is hardly a gift and must the annual affect of servicing, origination, and fees (lenders pay 1% up-front to the government). Obviously, this is not a give back to lenders. From another FFELP critic, quoted in the LA Times: "I would commend them on their speed and creativity in developing this short-term solution," said Robert Shireman, director of the Project on Student Debt in Berkeley. "It provides lenders with the same or similar access to funds that they had before the credit crisis, so that for at least the next year they will be able to make student loans like they did in the past." What has become crystal clear during the credit crisis and its affect on the student lending is that there are those who are open-minded and seek out the answers and then there are those who simply react in a kneejerk fashion without really understanding the issue. You pick which applies here.
Wow!
It is extraordinary that there has been only one consistent voice stating that the credit markets have not threatened the availability of student loans. There always seems to be a naysayer and this blog has certainly filled that roll. Too bad that virtually no one agrees with you, even those who have been critics of the FFELP in the past. From Congressman George Miller, chairman of the House Education and Labor Committee: "The proposed actions outlined by the Department reflect a thoughtful approach to implementing a key provision in our legislation to address the liquidity issues facing some lenders, at no additional cost to taxpayers." Was he among those who were duped as you imply? Was he a victim of a cynical game of chicken on the part of lenders? Or is there perhaps a simpler answer? Perhaps, Chairman Miller reached out to experts across the field of student loan finance, informed himself of the situation, held a well-timed hearing on the issue, responded appropriately, and urged quick action by the Department of Education. When the Department announced their measured plan this week, Chairman Miller praised it. Perhaps, too, there are those who get the math and understand the program better than it appears in this post. For example, the "trust" available at commercial paper plus 50 basis points in only for 15 months, during which time virtually all of the loans will be in school, earning commercial paper plus 119 basis points (not the higher 179 basis points when the borrower goes into repayment). The remaining margin is hardly a gift and must the annual affect of servicing, origination, and fees (lenders pay 1% up-front to the government). Obviously, this is not a give back to lenders. From another FFELP critic, quoted in the LA Times: "I would commend them on their speed and creativity in developing this short-term solution," said Robert Shireman, director of the Project on Student Debt in Berkeley. "It provides lenders with the same or similar access to funds that they had before the credit crisis, so that for at least the next year they will be able to make student loans like they did in the past." What has become crystal clear during the credit crisis and its affect on the student lending is that there are those who are open-minded and seek out the answers and then there are those who simply react in a kneejerk fashion without really understanding the issue. You pick which applies here.