NASFAA kicked off its annual conference in Orlando, FL yesterday with NASFAA President & CEO Dr. Phil Day peppering student loan industry representatives with questions about the student loan crunch. Brett Lief, president of the National Council of Higher Education Loan Programs, Kathleen Smith, president of the Education Finance Council, and John Dean, former counsel to the Consumers Bankers Association and principal at Washington Partners, said that H.R. 5715 has done much to ensure that students and parents have access to federal student loans, but warned that unless Congress and the next president make significant increases in student aid, all students will suffer.
"This discussion cannot be more timely than it is right now," said Day who asked lenders whether recent cuts to lender subsidies have gone too far. In the past three years two laws - the Deficit Reduction Act (DRA) and the College Cost Reduction and Access Act (CCRAA) have rerouted $39 billion from lender subsidies to other federal student aid programs.
"But these increases came without a single new dollar of investment from Congress," said Day who believes Congress must make dramatic increases in federal student aid dollars in the near future.
"Within the next few years, whoever is president is going to have to make a decision on how they are going to provide the additional funding for the student aid programs," Lief added. "To have a successful student loan program, you need to have a really really successful Pell Grant program."
Lief wondered where Congress would get money to continue funding federal student aid programs. "Congress has an insatiable desire to spend money," said Lief. "Congress is going to cut and cut and cut until someone stands up and says I'm mad as hell and I'm not going to take it anymore."
Dean said that none of the 119 lenders that have left the FFEL program did so voluntarily. Rather, lenders that have left did so because they could no longer make loans at an acceptable - if any - return on their investment.
"The laws of economics cannot be ignored, even when it's inconvenient," Dean said. "Those budget cuts - along with the turmoil in the credit markets - have changed the FFEL program."
In the face of these fundamental changes, Dean said that lenders are reexamining their business models and reluctantly curtailing their borrower benefits, efficiencies in overhead and marketing, and also in how they service students' loans.
There are some lenders who are having some success at raising funds, according to Smith. "But there are very few and they are very expensive."
Day asked the panel why lenders aren't sticking it out in a down-market. "Isn't it possible for them to hang in there with us until the business turns around, instead of bailing out or hanging in there for ‘some' students and not others, why don't they stay for all students?" asked Day.
Dean said that he does not condone lenders discriminating against students based on the schools they attend, but lenders cannot ignore the economics of the current situation.
"As frustrating as it is for you and me, these lenders are dealing with the laws of economics and are required to make a certain amount of return or quit the program," he said. "If we want the private sector involved, we're going to need to revisit the economics of the student loan program; the alternative is to say goodbye to the private student loan program."
If private lenders leave the federal student aid programs, that could destabilize other programs, according to panelists. "It's about the availability of aid and not about the FFEL or Direct Loan program," said Lief. Rerouting billions of dollars from the FFEL program to the Direct Loan program could destabilize both programs, according to Lief.
"The credit crunch has never been about lending institutions," said Day. "NASFAA has always been involved in making sure that loans are available for all students."
Day praised Congress and the Department of Education for their quick action on H.R. 5715, the Ensuring Continued Access to Student Loans Act (ECASLA). Another panelist, Robert Moran, senior advisor to Undersecretary Sara Martinez-Tucker, said that the government was involved in the loan crunch very early on. The White House, along with the Treasury and Education Departments, along with the President's Council of Economic Advisors, met several months ago to discuss the loan crunch. But the Department did not have enough tools to deal with the problem until ECASLA was passed, according to Moran.
"We are not trying to make this look like a taxpayer bailout, but an investment in the system," said Moran referring to ECASLA. The Department is also interested in making the FFEL program a more market-based system as opposed to a legislative one, according to Moran.
Dean predicted widespread participation in the Department's liquidity program. "Without H.R. 5715 we would have a massive student loan access problem," said Dean. While everyone felt optimistic that the results of ECASLA would be positive for students, some concerns remained. Day asked Moran to revisit the institution-wide lender of last resort designation provision that would require schools to prove that 80 percent of the borrowers are unable to obtain traditional FFELP loans.
Lief warned that unless the Department allows lenders to continue servicing their own loans, students would have split-servicing, which would result in multiple and higher loan payments for students. In a Webinar last week, the Department had said they hadn't reached any agreement on who would service those loans. Lief also said the Department needs to give both schools and lenders assurances that federal auditors won't "ding" them for implementing these provisions in good faith.
Two Committees Recognized
At NASFAA Board's reception on Saturday evening,Day welcomed attendees and thanked many of the members and past presidents, including Richard Tombaugh, NASFAA's first executive secretary and Edson Sample, NASFAA's sixth president, and recently retired NASFAA President Dallas Martin.
In a break from normal protocol, 2007-08 NASFAA National Chair Michael Bennett recognized two NASFAA committees for their outstanding service in the last year: the Research Committee and the National Student Access and Diversity Committee.
The Research Committee is contributing to 10 different sessions at this year's conference and the Student Access and Diversity Committee is contributing to six sessions, including a preconference that focused on communicating effectively with underserved populations. Both committees exemplify the work that can be accomplished through dedicated NASFAA volunteers, said Bennett.
The 2007-08 NASFAA Research Committee includes:
- Chair, Kenneth E. Grugel, Clarion University, PA
- Sue Armstrong, William Jewell College, Mo
- Fred M. Carter, Birmingham-Southern College, AL
- N. Christine Crenshaw, Kansas State University, KS
- Lefter Daku, Virginia Polytechnic Institute & State University, VA
- Mark L. Lindenmeyer, Loyola College, MD
- Theodore Malone, University of Alaska, AK
- Joseph P. Pettibon, II, Texas A&M University, TX
- Commission Director, Laurie A. Wolf, Des Moines Area Community College, IA
The 2007-08 Student Access and Diversity Committee includes:
- Chair, Sharon Hassan, Goucher College, MD
- Wayne Harewood, III, Kingsborough Community College, NY
- Peg Mason, Colorado School of Mines, CO
- Jannine Oyama, Honolulu Community College, HI
- Elaine L. Rivera, The University of Texas-Pan American, TX
- Virginia K. Washington, Indiana University-Purdue University Indianapolis, IN
- Commission Director, Karen Krause, University of Texas at Arlington, TX
During an orientation for NASFAA committee members on Sunday morning, Day urged committees to reach out to regional and state associations and ensure that their committee work contributes to NASFAA's overall strategic plan. "It's okay to take a detour here and there," said Day. "As long we all end up at the same place."
The 2008-2009 NASFAA committee rosters are available online.
Media Coverage
By Justin Draeger and Haley Chitty
NASFAA Associate Directors of Communications
Posted 07/07/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
