NASFAA Unveils A New Conceptual Framework For Student Lending

NASFAA unveiled a new conceptual framework for student lending yesterday that would replace the Federal Family Education Loan Program, the Direct Loan Program, and the Federal Perkins Loan Program with a program that integrates the best aspects of all three. The new model is a synthesis of recommendations from thousands of student aid professionals through its National Conversation Initiative on College Access (NCI), input from public policy experts, and careful analysis of more than 40 research studies.

This preliminary student loan model is just one piece of a larger set of NCI student aid policy recommendations that NASFAA will make public shortly. The recent release of President Obama's FY 2010 budget spurred NASFAA to release its student loan model in advance to ensure that it is considered as part of the continuing conversation and dialogue on changes to the student loan program.

"We now have a unique opportunity to dramatically redesign the program to better serve students," said NASFAA President and CEO Dr. Philip Day in a press release. "Our new model offers the groundwork for productive discussions that I expect will ultimately result in a simple, efficient, reliable, and transparent system of providing education loans to families."

This new, integrated loan program would be simpler and more equitable for students while expanding the amount of capital available to make loans through the capital markets. The proposed loan model encourages all beneficiaries of postsecondary education (borrowers, state governments, private employers, friends and families, and all Americans) to help pay down borrowers' debt levels and raise capital for a self-sustaining loan fund.

NASFAA's proposed student loan model:

Provides consistent and equal terms, conditions, and benefits to all borrowers
Offers a seamless loan origination, disbursement and repayment experience for students
Ensures a predictable and continuous source of capital for student loan funding that isn't dependent on any single entity
Allows individuals, families, companies, financial institutions, and all Americans to express their support for higher education by using government-backed special purpose bonds
Reduces federal expenditures by creating a self-sustaining funding source that relies on new, safe investment vehicles
Leverages technological and business innovations in the private sector by creating a common servicing platform that relies on a centralized database of all borrowers and can be used by multiple servicing agents
Creates new incentives for businesses, individuals, and states to help students repay student loan debt
Capitalizes on the expertise and best practices developed by all entities currently participating in the existing loan programs
Is not the FFEL, Direct Loan, or Perkins Loan program, but rather an entirely new loan program created from the most positive aspects of all three

Visit the National Conversation Initiative web center for more details about the loan proposal, the budget reconciliation process and the NCI.

Media Coverage

Breaking the Silence on Student Loans Inside Higher Ed

Student-Aid Administrators Urge Lawmakers to Reconsider Killing Guaranteed Loans The Chronicle of Higher Education

Posted 03/20/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.