NASFAA Urges Lawmakers To Delay PLUS Loan Auction Pilot Program

NASFAA urged education leaders in Congress to delay implementation of the Competitive Loan Auction Pilot Program for parent PLUS loans because the current economic conditions could cause the pilot program to harm parent borrowers.

In letters to Education and Labor Committee Chairman George Miller (D-CA), the committee's Ranking Republican Howard "Buck" McKeon (R-CA), Senate HELP Committee Chairman Edward Kennedy (D-MA), and the committee's Ranking Republican Mike Enzi (R-WY), NASFAA President and CEO Philip Day notes that "while innovation and experimentation can be desirable methods of testing loan subsidization alternatives, current market conditions and the relatively short time until the pilot's scheduled launch date on July 1, 2009, warrant more analysis to avoid unintended consequences."

In December 2008, NASFAA wrote then-Secretary of Education Margaret Spellings a letter asking her to use the Secretary's authority to postpone the auction. On February 2, a Department official responded in a letter stating that the Department lacked the authority to postpone the program.

A Department official noted that provision in the law that created the pilot program does not give the Department authority to "postpone or delay the implementation of the requirements of this section."

The Department said that it was developing procedures for lenders to bid in the pilot auction program and would soon publish those procedures in the Federal Register.

"In formulating our plans for implementing the Competitive Loan Auction Pilot Program, the Department has taken into consideration the current economic conditions," the letter states.

Despite this reassurance from the Department, the importance of this issue to parent borrowers and NASFAA member schools led Day to suggest that congressional leaders err on the side of caution.

"Delay of the implementation of this program will not only allow the credit markets to settle, but it will also give the new Administration the opportunity to fully explore the program's economic ramifications and its potential effects on parent borrowers," Day wrote.

Posted 02/24/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.