NASFAA's New Chief Is No Aid Expert

Thank you for putting so many of Mr. Day's ill-informed comments in one article. If he wishes to be the voice of financial aid administrators (as his organization's title indicates), then he should do his homework before giving quotes and interviews. If his goal is to continue NASFAA's disservice to direct loan schools while pandering to private lenders, he will accomplish nothing as NASFAA's new president.

This nasty attack on Dr. Day follows an earlier one focusing on him and one that basically suggested that bribes were among the explanations as to why Rep. Kanjorski supported federal intervention in the student loan markets. I seriously doubt Mr. Burd would have a problem with Dr. Day or Congressman Kanjorski had they called for all schools to immediately join the Direct Loan program.

What could be motivating these vicious and unfair attacks?

As a parent who helped two children fill out college applications, loan applications, reviewed their financial aid packages, and observed closely (from the inside) how the financial aid industry works, I am not surprised that NASFAA is under fire in critical stories in The Chronicle, ads in the New York Times, and now by Higher Ed Watch. Thanks to Higher Ed Watch for writing what many of us have thought as we watched, time and again, NASFAA repeat factual untruths and the worst kind of rhetorical excesses while posturing as student advocates. A commenter on a previous post asked what NASFAA should do. Answer: return to the days when NASFAA truly put students and families first, stood up to lenders, consultants, and even to college presidents, when necessary to maintain integrity and a tradition of service which, unfortunately, is now slipping away.

It's possible the blogger doesn't remember, but especially when the Direct Loan program was introduced, schools did indeed have a lot of questions about the Federal Govt. getting involved in a program that was running fairly smoothly without full govt. involvement. As an administrator, I heard that same concern raised literally hundreds of times. Competition among lenders drove benefits to students up. In the current environment, as competition wanes, benefits to borrower are disappearing, and fast.

The processing of a loan is different from the Federal Pell Grant program--I'm sure the author is not "ignorant" of that. I think he'd find that if he actually talked with institutions as Mr. Day has, the blogger would find that Mr. Day was accurately expressing a concern that schools had expressed to him.

More recently, I've heard some schools describe difficulty shifting from FFEL to Direct, often due to IT issues. So maybe the shift was set up to be easy, and in many cases it probably is. But in some cases, in practice, it is not. So again, Mr. Day appears to be expressing the reality of the situation and the concerns of a portion of his members who want time to make sound decisions, rather than be rushed into what can at times be an IT nightmare that may temporarily slow service to their students.

I've heard Mr. Day speak and his focus is the students and keeping all the aid programs - Direct and FFEL - available to families. It may be that one day there will only be one program, but to try to make that change in a few months? Students don't deserve that kind of "rug out from under them" scramble a few months before they start college.

And yes, when you run two extremely negative blogs about the same person in two days, it does appear to be an attack.

If we want to go back in history, then let's take a more comprehensive look.

I remember what could be seen as the moment of momentum for the creation of Direct Loans. That was the total collapse of the the largest private student lender in the country, MAAHELP, the repercussions of which reverberated throughout the industry for several years and greatly affected the level of service.

I remember nationwide default rates in the teens and twenties.

I remember loan fees upwards of 7%.

I remember loans sold hither and thither, without regard to the student's "choice" of lender, to their future servicing, nor to the effect on repayment amounts.

I remember the only recourse the student had was to take a consolidation loan that raised their interest rate to at least 9% and lost all subsidized properties.

I remember promises of EFT to come. For years. At roundtable discussion after roundtable discussion. I also remember that those EFT efforts ramped up and became widely available just a few months after Direct Lending went live.

I remember (right up to today) industry officials being paid tens of millions of dollars while crying that any cut in subsidy would be the end of student loans as we know them. And then continue to receive tens of millions of dollars and their companies making hundreds of millions after such a cut.

But I never remember the amount of lobbying activity and spending by the SL industry to change any of those things like we saw in the effort to, at first, stop Direct Lending from coming on line and then, to undermine its continued existence.

It also cracks me up when FFEL apologists cite FFEL as an example of free market capitalism - "What have you got against a private company making a profit?" FFEL is, and always has been, Corporate Welfare - at most generous, a public/private partnership. But it can never be called Free Market. And to the extent that competition ever came in, it was because of Direct Lending, not in spite of. It was Direct Lending that introduced default prevention payment plans. It was Direct Lending that had a workable Consolidation Loan (until the industry managed to destroy it).

Let's also not forget about the Consolidation fixed interst rate crisis, that was, like today's credit crisis, totally a manufacture of the lending industry. Rather than lobbying for a Consolidation like DL, the industry couldn't abide by what would have the scent of success by DL. So it made sure to change ALL Consolidations to something that was guaranteed to become unfair to certain students, simply because of when one started school and would be, ultimately, unsustainable. And whose final solution was to fix interest rates, where if these had been left alone, student would be seeing 3.6% intertest rates next month.

Also, I can never remember a mention, not even in rumor, of fraud or bribery in a Direct Lending setting, by schools or the Depart of Ed.

No. NASFAA does indeed need to see past this "partnership" and work toward solutions for students and institutions, not protectionism for taxpayer-financed corporate profits.