FROM: Dr. Philip Day, President and CEO

RE: Opportunity To Make Pell A True Entitlement

Dear NASFAA Member:

These are truly historic times for financial aid. President Obama was swept into the White House on a groundswell of popularity and has used this mandate to propose a bold agenda including changes to the financial aid system. Most notably, the Obama administration issued a budget blueprint for the 2010 fiscal year that proposes some dramatic changes for the nation's student financial aid programs, including converting the Pell Grant program into a mandatory spending program that is increased annually and not subject to the annual budget process. The proposal would also move the administration of all federal loans under the auspices of the Federal Direct Student Loan program, effectively ending the public/private partnership that is the Federal Family Education Loan Program (FFELP).

Many financial aid administrators are understandably anxious about the prospect of eliminating FFELP and all the benefits that it has provided for more than 40 years. Let me assure you that NASFAA is also highly concerned about an abrupt end to FFELP and the services it provides students. The House has passed a budget resolution with reconciliation instructions that would make it easier for the Senate to pass Obama's financial aid proposals, and recent reports indicate that a deal has been struck between House and Senate leaders to include these instructions in the final budget resolution.

Unfortunately, many assume that if Congress adopts the reconciliation instructions in the House budget resolution, it will automatically mean everyone will be moved into Direct Lending as we know it today. I think this is a false assumption. Technically, the reconciliation instructions simply direct committees to enact certain budget savings. In this case, the House and Senate education committees will likely be instructed to produce legislation later this year to save $1 billion. This would give Democrats time to explore alternate student loan options and provide a safety net to ensure their plans are not stonewalled by Senate Republicans.

My staff and I have personally received explicit assurances from education leaders in Congress and the Obama administration that the adoption of the House's budget resolution -- with the reconciliation instructions -- would NOT prevent rigorous debate about the future of the student loan programs. These same key players have also made it clear that without reconciliation instructions, it will be impossible for Congress to accomplish NASFAA's long-time goal of making the Pell Grant a true entitlement. These two points were repeatedly made clear to me during separate meetings with top officials in the Obama administration and the House and Senate education committees.

In addition to assurances NASFAA has received, top Democrats in the House have publicly stated their intent to explore alternative student loan options. In a recent press release, House Education and Labor Chairman George Miller noted that Obama's proposal to fund all federal loans through the Direct Loan program is "one student loan reform option that could be explored." In addition, the House Budget Committee released a report to accompany its 2010 fiscal year Budget Resolution that urges "the Committee on Education and Labor to review options for the student loan program that will maintain a role for FFELP lenders in the student loan program, and to look to ways to achieve savings that capitalize on current infrastructure and minimize the disruption to students and the employees of FFELP lenders who currently serve 75 percent of loans at American colleges, universities, and community colleges."

NASFAA recognizes that the FFEL program has provided a great service to this country and to the students it serves. Unfortunately, recent economic forces have hampered FFELP's ability to provide student loans. Since the first signs that the credit crunch was impacting students' loans, NASFAA has been a vocal supporter of the Ensuring Continued Access to Student Loans Act (ECASLA), which enabled the federal government to prop up FFELP and continue service to students. Our singular motivation in pushing Congress to pass a solution to the liquidity crisis last year was to ensure that the financing needs of borrowers were met without disruption. But it is clear that ECASLA is a temporary solution and it is obvious that a new student loan model is needed -- and needed quickly. If we simply oppose FFELP elimination without offering alternatives or including ourselves in the debate, schools will be forced to move to the Direct Loan program, either because the Obama budget will have been accepted or because ECASLA expires in 2010.

We must move forward in good faith and help design a system that works best for borrowers, taxpayers and institutions. In addition to the importance of providing a workable alternative to the abrupt elimination of FFELP, we must also remember the historic opportunity we have to make the Pell Grant a true entitlement. This is a goal that NASFAA has worked toward for decades, and there are many who never believed we would be so close to seeing this essential change enacted.

In a recent meeting, key Congressional staff members were openly excited about NASFAA's National Conversation Initiative (NCI) recommendation to increase the maximum Pell Grant award to $12,900. They told me that they were glad that someone was finally recommending a maximum amount that would make a real difference in college access and affordability. They also made it clear that the only way to achieve a Pell Grant award of this magnitude was to make it a mandatory spending program.

We strongly believe in restoring the Pell Grant program so it can achieve what the program's creators envisioned. As one NASFAA Board Member recently said, "Let's make the Pell Grant relevant again."

Finally, let me add that in all my years of working in postsecondary education, regardless of my position, I have never experienced a time in which the notion of access to and success in college has been so prominent. Even those outside of higher education are starting to understand more directly the important role that financial aid plays in that equation. President Obama has elevated college access discussions to unprecedented levels. He has proposed something that no other president of this country has proposed: to make Pell a true entitlement through mandatory funding.

Yes, he has proposed changes to the loan program as well. But we must not allow this unprecedented focus on grants to be derailed through inevitable changes to the loan programs. We don't know where this will end up, but I can assure you NASFAA will be engaged in these discussions.

The current Administration and Congress are poised to act in support of many of our long-standing priorities to increase access and success in postsecondary education. We mean to take full advantage of these opportunities on behalf of our students, who are our number one priority. We need to be in a position to strongly advocate on their behalf. I hope this letter has provided additional clarification on these matters and that you will join us in supporting this effort.

Sincerely,

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