A diverse group of 32 lenders, guaranty agencies, secondary markets and servicers representing public, private and nonprofit segments of the student loan community on Tuesday proposed an alternative to President Barack Obama’s plan to revamp the federal student loan system. Instead of moving to a 100 percent direct lending system administered by the federal government, as the Obama administration proposes, the Student Loan Community Proposal would allow private and nonprofit lenders to continue participating in the student loan market.
The Washington-based coalition known as America’s Student Loan Providers (ASLP) issued a statement Tuesday saying that its reform proposal will accomplish a similar level of taxpayer savings for student financial aid as the Obama plan has promised, while preserving consumer choice, borrower default-prevention programs, and more than 35,000 jobs in local lending markets.
“The student loan community’s proposal offers the best of both worlds -- it melds the president’s proposal’s cost-saving features with tried and true program elements that have served families well since 1965: consumer choice, superior service, innovation, local administration and borrower default prevention programs,” according to the ASLP coalition statement.
Officials say the Student Loan Community Proposal endorses the core principles of the Obama administration’s reform effort -- using federal funds to guarantee the stability of student loan financing, eliminating subsidies to private lenders, and generating historic savings for student financial aid. In addition, the coalition members say the proposal achieves these goals without the significant transition risk undertaken by 4,500 schools that will result from the federal government taking control of more than $60 billion in student loans.
The ASLP plan says taxpayer savings will be available to cover the Obama administration’s proposal to expand the Pell Grant program by establishing a fee-for-service system for loan originations, servicing and collections to be performed by student loan service providers of a student’s or school’s choice.
