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.