From the Consumer Bankers Association…
Eliminating private sector in education funding will lead to more defaults, poor customer service, higher administrative costs for schools and add to the Federal debt.
The Consumer Bankers Association commented on the budget resolution passed recently by the House Budget Committee which allows for the enactment of an Obama administration proposal to cease new student loan guarantees in the Federal Family Education Loan program as of June 30, 2010. Under the administration’s proposal, all new student loans would be made under the Direct Loan program using federal funds borrowed through the Department of the Treasury.
CBA Director of government affairs Marcia Z. Sullivan commented on the proposal: “Students, schools, and most especially, taxpayers should be concerned about elimination of the FFEL program. Students will suffer deteriorating customer service, especially as they attempt to repay ever-growing amounts of student loan debt. Schools will be subject to poor customer service, increased opportunity for regulatory violations, and higher administrative costs. Taxpayers face the risk that the approximately $100 billion in new federal borrowing called for by the administration will create further risk of loss of investor confidence in the fiscal soundness of the U.S. government.”
Sullivan added, “CBA regrets the action of the House Budget Committee and remains hopeful that legislators of both parties will scrutinize the proposal and see it as unsound fiscal and social policy.”
CBA has posted a petition in support of maintaining involvement of the private sector in student lending on its website at www.cbanet.org. As of today, over 4,000 signatures had been added to the petition. Signers cited loss of borrower choice, likelihood of higher defaults, loss of jobs supporting the FFEL program, and fear of increased federal borrowing as reasons for their opposition to the phase-out proposal.
The Consumer Bankers Association is the recognized voice on retail banking issues in the nation’s capital. Member institutions are the leaders in consumer financial services, including auto finance, home equity lending, card products, education loans, small business services, community development, investments, deposits and delivery.
CBA was founded in 1919 and provides leadership, education, research and federal representation on retail banking issues such as privacy, fair lending, and consumer protection legislation/regulation. CBA members include most of the nation’s largest bank holding companies as well as regional and super community banks that collectively hold two-thirds of the industry’s total assets.