“Thank you for considering signing on to the attached group letter, which encourages Congress to continue making higher education accessible and affordable using the widest range of government- and private-sector loan programs and partnerships,” the handwritten letter begins.

Written on joint Nelnet and Consumer Bankers Association letterhead, messages like this one have been faxed to local chapters of the American Federation of Teachers, AFL-CIO and other unions over the past couple of months, setting off a backlash over what the unions say is a misleading campaign to gain support for continued federal subsidies to the student loan industry — subsidies many Democrats are pushing to scale back...

The lenders’ argument has been that competition in the private market has led to rates that are currently lower than those of the government’s competing direct loan program, with profits allowing for investments in technology and greater efficiency that reduce the rate of loan defaults. The faxed letters emphasize that the student loan programs have been working and that without subsidies, the FFEL program could be destroyed, leading to less choices for students...

“This just appears to be what the loan industry does best: spreading fear to try to keep their subsidies high. It’s an unfortunate effort to mislead people about what’s really at stake,” said Stephen Burd, a senior research fellow at the New America Foundation who has been investigating the student loan industry...

The New America Foundation’s Higher Ed Watch blog wrote that “while there might be public support for increasing the accountability for defaults on the college level, it’s hard to stomach the thought of a system where the students who most need help getting to and getting through college are offered the most expensive loans and the least forgiving terms.”

For the complete article, please visit the Inside Higher Ed website.