Whispering in the Ears of Aid Administrators

Warning, Arkansas Congressional delegation, you are about to start hearing from financial aid administrators in your state upset about President Obama’s proposal to eliminate the Federal Family Education Loan (FFEL) program. If you listen carefully though, you’ll notice that the complaints sound awfully alike. That’s because they come straight from talking points provided by the Student Loan Guarantee Foundation of Arkansas (SLGFA), the state guaranty agency.

On Tuesday, the Arkansas agency sent out a special alert to college financial aid administrators in the state entitled “School Support Needed to Help the Federal Family Education Loan Program.” The guarantor warns the college officials that urgent action is needed. “The budget process is moving very quickly, and it is critical that your Congressional members hear from you this week,” the alert states. “If you do not have time to write a letter, please call and express your views” related to “the merits and benefits of FFELP.”

But just in case the aid administrators who receive this message can’t think of anything good to say about the FFEL program on their own, the Arkansas agency helpfully provides them with “information points that will help you craft your message.” Among other things, the aid administrators are asked to tout “local services offered by SLGFA and its trading partners.” And for those aid officers who are not sure who to contact, the guarantor is considerate enough to provide “the name, e-mail address, and telephone number for each of the education aides working for your Congressional delegation.”

Now we don’t know how successful this campaign will be. In the wake of the “pay for play” student loan scandal, we’d imagine that some aid administrators would be wary of being asked to do the bidding of their local guaranty agency. But such concerns don’t seem to faze the Arkansas guarantor, which counts as one of its major accomplishments in 2008 that it helped staff both the state and regional associations serving Arkansas financial aid administrators. A Higher Ed Watch investigation last year found that 32 percent of individuals serving in leadership positions (board members and committee chairs) at the Arkansas Association of Student Financial Aid Administrators were members of the loan industry.

All this is to say that the Arkansas Congressional delegation better be prepared for the calls, e-mails, and letters it’s about to receive. In that spirit, we thought it would be best for us to post the alert in its entirety so that the lawmakers and their staff members will know what exactly the guaranty agency is asking financial aid administrators to say:

School Support Needed to Help the Federal Family Education Loan Program (FFELP)

On Wednesday, March 4, 2009, SLGFA published its response to President Obama’s budget proposal calling for the elimination of the Federal Family Education Loan Program (FFELP). During the update at our annual conference, we indicated that we would engage members of the financial aid community to communicate with our elected officials concerning the merits and benefits of FFELP. The budget process is moving very quickly, and it is critical that your Congressional members hear from you this week. If you do not have time to write a letter, please call and express your views. Included in this correspondence is a list of information points that will help you craft your message in support of borrower choice and continued local services offered by SLGFA and its trading partners. Also, included are the name, e-mail address, and telephone number for each of the education aides working for your Congressional delegation.

Information Points

• The FFELP provides locally-based services and jobs in every state in this nation. FFELP participants provide outreach services and materials to schools, students, and community organizations to increase college-going rates and awareness about financial aid and improve financial literacy. These services are targeted to the needs of local populations. These benefits will be lost if the government is the only lender. The federal government does not offer comparable services.
  
• For 43 years, the FFELP has fostered competition between student loan providers to offer benefits for borrowers and quality customer services, and for the past 15 years, this competition has expanded to include the federal government. Students and schools have benefited from the efficiencies developed in the FFELP because loan providers have a constant incentive to innovate and offer better and more convenient services.
  
• Customized services have been developed by FFELP participants to increase delinquency aversion and reduce default. These initiatives differ from state to state and include peer assistant programs to educate students, early intervention programs to help high-risk borrowers, and specialized contact to help borrowers who have fallen behind in their payments. These local outreach efforts are particularly needed during these difficult economic times. The federal government does not offer these state-based, targeted delinquency aversion and default prevention services.
  
• The FFELP embodies the suitable role of the government in facilitating the private sector to further the public welfare.Moving away from a model that provides reliable funding to students and families by leveraging private and nonprofit financing does not make sense. Even with the financial difficulties this nation is currently facing, not one student has been denied a student loan for the current and upcoming academic< year. Not only will the benefits of competition be lost if the federal government is the only lender, but it will also increase the public debt by roughly one-half trillion dollars over the next five years.
  
• An increased federal investment should be made in the Pell Grant Program but the case for that funding can stand on its own. It should not be tied to purported FFELP savings.

[The letter then provides a list of the Arkansas Congressional delegation, along with contact information for the members’ legislative aides.]

SLGFA would appreciate receiving a copy of the correspondence you send to any member of Congress. You may e-mail copies to SLGFA Policy ad Compliance Division Chief Compliance Officer Becky Collins. As has been stated, this does not have to be a one-sided debate. Let your voice be heard and help structure the future of FFELP.