For-Profit Lenders

In the coming weeks, the Senate is expected to begin consideration of a companion bill to the Student Aid and Fiscal Responsibility Act adopted by the House of Representatives last month. In an effort to derail the legislation, which would expand the Direct Loan program and eliminate the Federal Family Education Loan program (FFEL), the student loan industry has been making some pretty outrageous arguments to Senators and staff. Consider our favorite example below from loan industry talking points -- which Higher Ed Watch has obtained -- that were provided to Senate staff.

MYTH: Forcing all students to borrow Direct Loans will save billions over the next 10 years by eliminating huge subsidies being paid to private lenders.

FACT: Lenders are not being paid subsidies. This year, lenders will pay the government $9 billion in interest that is passed on from borrowers and in fees. (Source: Budget Appendix, page 388)

It is easy to understand why anyone would be confused by such a statement. Why would private lenders care so much about the proposed elimination of FFEL if they weren't getting any government subsidies under the program? If that were the case, lenders would stand to lose nothing when the program is eliminated -- they would be able to continue to make loans to students at the same FFEL borrower terms as before. Nothing in law would prevent them from doing so.

Repeat after us: There is no federal student loan crisis. There is zero danger that federal Stafford loans will not be available in the foreseeable future. Zero danger. At some point in the future, there may be a squeeze on private student loan availability for some high risk borrowers, particularly those attending proprietary schools of questionable quality and limited track record as opposed to all proprietary schools. Should a large private student loan access issue arise, extending even beyond proprietary schools, there are options for federal action to ensure the availability of capital. But let’s not get ahead of ourselves.

Yesterday's blog post on Higher Ed Watch argued that legislation under consideration by both the U.S. House of Representatives and the Senate does not go far enough in confronting conflicts of interest between colleges and lenders. …

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

They may share little more in common than the name Lord, but Isiah Lord Thomas (his given name), the much-maligned general manager and coach of the New York Knicks, and Al Lord, the oft-criticized Chief Executive Officer and former Chairman of Sallie Mae, are sitting on seats hot enough to…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

When student loan giant Sallie Mae announced on Monday that it was removing Al Lord, the company's Chief Executive Officer (CEO), from his position as Executive Chairman of the board a little more than a month after he took the job, it went to great lengths…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

Santa has some tough decisions to make this Christmas. We've decided to help him out with our own list of who's been naughty and who's been nice this year in higher education.

Let us know who, if anyone, you think should be added to the list…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

Yesterday, we wrote that officials in Iowa are investigating whether aggressive marketing practices by the largest student loan provider in the state, and the cozy relationships it has developed with area colleges, have pushed students to take on unnecessarily high levels of expensive private student-loan debt. Specifically, Iowa's…

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.