The Honorable John Kline
Ranking Member
Committee on Education and Labor
House of Representatives
Washington, D.C. 20510

Dear Chairman Miller and Ranking Member Kline:

As you consider higher education legislation to be marked up by your committee in the near future, I wanted to make you aware of some issues and relay a few of my members' concerns. The National Association of Student Financial Aid Administrators (NASFAA) represents some 20,000 financial aid administrators at nearly 3,000 colleges and universities from around the country. NASFAA members serve approximately 16 million students each year by helping them secure funding to meet their postsecondary educational goals.

The overwhelming majority of our members strongly support expanding the Pell Grant program. As you know, many of our members have serious concerns about the proposal to abruptly move all institutions into the Direct Loan program. Their primary concern is the potential loss of important early awareness, financial literacy, and debt management services provided through the Federal Family Education Loan (FFEL) program. I'm hoping that you can address some of our concerns during this upcoming legislative process. Doing so will create additional support for the bill and ensure that the legislation doesn't inadvertently harm students' ability to pay for college.

Pell Grant Increase

If lawmakers move to eliminate the FFEL program and redirect the subsidy currently paid to private lenders, NASFAA strongly supports using the $87 billion in savings estimated by the CBO to increase mandatory spending for the Pell Grant.

Such an increase would do more for college access than any other education legislation passed in recent years. According to the College Board's 2008 Trends in Student Aid, the inflation-adjusted value of the maximum Pell Grant has actually decreased from $4,781 in 1977-78 to $4,310 in 2007-08. With tuition again on the rise due to lack of public appropriations, workers returning to school to retrain for new jobs, and students and families struggling to pull themselves out of pernicious cycles of poverty, Congress can make no stronger statement about its commitment to college access than by continuing to strengthen the Pell Grant.

These funds should also be used to ensure that students don't face a drop in Pell Grant awards due to the scheduled expiration of the American Recovery and Reinvestment Act (ARRA) and the College Cost Reduction and Access Act (CCRAA).

NASFAA members are also very concerned that the reconciliation process might again be used to create additional aid programs, as was done with the ACG and SMART Grant programs, which have proven ineffective in increasing college access. These programs have made the already complex financial aid system even more complex for students. Our members feel strongly that the bulk of these funds should be used strictly for the Pell Grant.

Switching to Direct Lending

The majority of institutions currently participate in the FFEL program. Not surprisingly, the proposal to eliminate FFELP has raised concerns among financial aid administrators. In a recent survey of NASFAA schools, 70 percent of respondents said they were concerned about the loss of FFEL delinquency and default prevention services. Most of our member institutions have also expressed concern about the loss of early awareness, financial literacy, and financial aid counseling services offered by nonprofit FFEL participants.

As outlined in our preliminary framework for a new student loan model released in March, NASFAA supports the concept of guarantors and other nonprofits offering borrower support services to ensure that this vital assistance continues. These entities could be prequalified by the Department of Education to offer services on a state by state basis such as:

• Default prevention
• Late-stage delinquency intervention
• Financial literacy servicing
• Entrance and exit counseling
• Debt management counseling
• Default management counseling and loan rehabilitation advising

Without the assistance of traditional, non-profit FFEL participants that have provided many of these services in the past, most schools - especially schools that serve predominately low-income and historically underrepresented students - will lack the resources to do so effectively.

Existing legislation currently provides incentives for schools to be deeply involved in helping borrowers avoid the awful consequences of default. They are held accountable for the numbers of their borrowers who enter default. With the transition from two-year to three-year default rates taking place in the next few years, schools are concerned about any possible legislation that would diminish borrower services and result in more students falling into default.

If Congress mandates that all schools participate in the Direct Loan program, ensuring that borrower support services continue to be offered to students will be a vital part of a successful transition.

We also believe that some schools will need additional time - beyond the July 1, 2010 deadline - to make a smooth transition to Direct Lending. While education legislation is expected to be considered soon, it may be several weeks or even months before that legislation is completed in Congress and signed by the President. Under the proposed deadline, more than 4,000 schools will likely have less than a year to make this transition. I urge you to consider an extension for some schools that may lack the internal resources to make such a significant change as quickly as may be required.

To date, the Department has received high marks from my members for assisting schools that have switched to the Direct Loan program. But financial aid administrators express concern about the Department of Education's ability to transition so many schools into the Direct Loan program in such a short period of time. You can address these concerns by providing the Department with additional resources to help them ramp up their ability to field schools' questions and effectively handle the additional loan volume.

I appreciate your continued efforts to make higher education affordable and accessible and encourage you to contact me with any questions, comments or concerns.

Sincerely,

Dr. Philip R. Day, Jr.
President and CEO
National Association of Student Financial Aid Administrators