I just recently paid off a multi-year, mid-five-figure debt to the IRS. Any contact with the unionized public servants was courteous, efficient, knowledgeable, and within the law. Contrast this with the beggar-bounty hunter collection agencies that have "serviced" my alleged defaulted student loan debt -- lawbreaking, abusive, not knowledgeable, and interested in their profit rather than bringing my alleged debt into compliance.

Thanks to NAF for putting that $94 billion number out there. That's a lot of money over 10 years to be saved by switching over to DL. Albert Lord, SLM Corporation ("Sallie Mae"), could build himself another 300 personal golf courses with that kind of money.

My God, does Mr. Delisle believe that if he repeats himself over and over again, he will make the unbelievable believable? On increasing the federal debt--are we to understand (for instance )that if a FFEL lender was responsible for an act of gross malfeasance with respect to its obligations under the FFEL program, and that malfeasance caused the federal government to revoke the federal guarantee on the FFEL lender's loans, the federal government would somehow be liable to the FFEL lender's bondholders for any losses? Investors who supply financing to FFEL lenders have absolutely no recourse to the federal government if the FFEL lender does not meet its obligations with respect to such financing. The FFEL lender is solely responsible for paying debt service, maintaining the federal guaranty, and so on. The contract is between the FFEL lender and the investor--period!

When Direct Loan assumes responsibility for FFEL's former volume, the investor supplying the financing to the government will have direct recourse to the government for debt service, losses, and so on--the contract is between the investor and the government (unlike with FFEL today). Sorry Mr. Delisle, but your bewildering theory does not survive the rigor of the real world! (Kinda like that PLUS auction you favor!) The federal debt does increase with the elimination of FFEL, it is not the zero-sum game that you erroneously claim for the federal government. (Back to the drawing board--we're still awaiting credible justifications for no FFEL!)

Wow! That is some tortured logic, to pretend that "national debt" and "Dept of Ed loan guarantees" are a 1:1 relationship. Consider this; China is only going to buy a finte number of T-bills, so placing student debt privately means the gov't can conserve funds for other projects...like nationalizing the rest of the industrial sector. @JasonDelisle said "We don't say to lenders, 'Compete on the subsidy and then we'll take a low bidder and we'll find out how much efficiency is really there.'" Uh, sorry Jason, but we do, PLUS auctions start next year. You might want to Google the CCRAP legislation (pun intended) that was passed last year. Just because FDLP servicing is contracted to private companies doesn't make it the same as FFEL servicing. The Draconian regulations the fed requires make the work environments crushing. Also, bidding for FDLP servicing is a monopoly, you have to be an enormous multi-national corporate giant that hugs all the right trees. Keep spinning New America, you'll get to China eventually.

OK - so why doesn't the government take over all the banks? Then the auto industry, etc... The government can't do it as well or as efficiently as private enterprise. FYI - 97% is less than 100% - so going all Direct definitely puts more risk onto the government - as well as the requirement that the government has to raise all the funds to lend. 3% of $80 billion is $2.4 billion - which is a lot of taxpayer money. The competition between the two programs has been great and both programs are better for it. The arguments on both sides are valid. However, both sides are going to extremes to make points while the student and financial aid officers who serve them are forgotten. Common sense says to keep both programs and find efficiencies where we can.

The headline oversells Jason's presentation, just as direct loan advocates oversell direct lending (and understate the harm to schools, students and workers).

Jason doesn't even come close to debunking the true criticisms of the Administration's plan. Instead, he debunks strawmen.

Lenders say the Shireman plan would create a monopoly and eliminate consumer choice and competition among lenders and between programs. I have yet to hear Jason or anyone else debunk that statement.

It is the law of the land that a loan guaranty, which is a contingent liability, is reflected to the extent of the realistic expected losses. The default rate on student loans is not 100 percent.

"The government’s obligation in the future must be firm to justify including the costs for it in the budget today," former OMB director Holtz-Eakin wrote.

Finally, he grossly misundertands the differnce between the act of making loans or guaranteeing them and the process of funding these two activities. In a deficit environment, the government necessarily borrows to fund direct loans. It doesn't have to do that dollar-for- dollar with loan guaantees.

It is Jason's view that is "absurd."

I am not aware of a single lender who has said that "If Congress gets rid of FFEL, students will be denied generous borrower benefits."

Jason, please tell us who said that.

Is he or she made of straw?

I work for a collection agency that specializes in educational debt. We are not the bullies you see on Dateline NBC or read about in the tabloids. We are highly trained professionals who work hard to help borrowers with defaulted loans. We often help borrowers take advantage of consolidation and rehabilitation programs to resolve their defaulted loans.

Two thirds of the loans we collect in my office (that employs over 600 people) are FFELP guaranteed loans. Nationwide, the administration, servicing and yes, collecting of defaulted or delinquent FFELP loans employs nearly 30,000 people. While I support the presidents goals I have to ask, must we put 30,000 hard working Americans with families to support on the unemployment line? Based on dubious claims of increased efficiency? FFELP works, and works well. I am all for increasing Pell grants and direct lending. It does not need to come at the expense of a program that works
.

Saying you are such repeatedly does not make it so. Why contort around this illusion that guarantees equal direct liabilities? If the DOE published true apple to apple numbers on default you can peg the FFELP with 7 percent vs DL 5 percent. That's it. There are no sales forces blitzing schools for FFELP volume...they are looking for companionated private volume with much higher margins. You know that. Here's how the conservative rap should go, try it:
the market worked pretty darn well for 40 years and then crapped out on student loans like it did just about every other financial instrument. Borrowing cheap and loaning cheap died. Without direct federal intervention no FFELP loans would have been made last year or this. End story there. But you gotta finance those kids because the college racket is too big to fail. Nothing stops that train--loans must be made, more and more every year. The conservative asks why is the federal government on the hook at all? Stop the college corporate welfare.

While there are good and bad things about FFELP, we should consider that this is an aging system. FFELP money comes from one source the tax payers and that is why it has "federal" in its name. If loans are sold or not, the fact remains that we tax payers need to put more money to fund the education for our future work force. With our economic status, all borrowers receive the same benefits-gone are the days of searching for the lender with the best perks. Yes, the loss of employment will be great, but who hasn't lost their job that they have had for years? And, private isn't always solution if so, why don't we privatize other "federal" agencies like the post office? No the government can't do it all, but it should do things that serve the public interest even if it is inefficient (long lines at the DMV ring a bell). Perhaps a phase out of the FFELP system is needed; as well, as integration of guarantee agencies and their services and outsource collections...just a thought.

Take it from me, I have student loans and worked for a lending and consolidations company (we ceased operations due to the economy). I believe strongly that anyone who has the will should get "federal" money, but why should there be a middle man? Loss of an industry can mean birth of a new one-isn't this the land of capitalism. Plus, historically, one of the reasons FFELP was created was because the government didn't have sufficient resources to lend to a growing population, but now we do. Deficit? Haven't we always had one? Why don't we start re-investing in America because there seems to be enough money for other foreign interest.
In the end does it really matter that these private lenders close doors (mine did), specially, when FFELP means "federal" money.

Keep in mind Banks such as Citibank and Chase has denied borrowing from many community college students. If FFELP continues on its current path many more students will be left without choices, which is one of the arguments coming from the FFELP lenders as a positive. Also, many students FFELP loans have been sold to Direct Lending in the wake of the banking crisis.

Moving to Direct Lending, which is processed in the same manner as Pell Grants, would be a more stable environment and good for consumers. Lenders are telling schools how to process loans with them creating a very complex processing environment which delays money getting to the students and make the process much less efficient. Also, some lenders have become no better than payday loan companies and prey on students and parents which has created the need for paper certifications and paper checks which add to the inefficiencies of the FFEL program.