[Congressional Record Volume 154, Number 151 (Tuesday, September 23, 2008)]
[Senate]
[Page S9269]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         FEDERAL STUDENT LOANS

  Mr. HARKIN. Mr. President, just last week Congress passed a 1-year 
extension of the Department of Education initiative to buy back student 
loans from lenders who have difficulties accessing capital in the tight 
financial market. I was pleased to support the extension of this 
program which has injected more than $1 billion in capital to lenders 
and has had a hand in ensuring students have access to federally 
guaranteed student loans in the 2008-2009 school year.
  However, the continued need for the Federal Government to prop up 
student lenders, many of which already operate at a profit, concerns 
me. Companies making loans through the federally guaranteed program 
already receive generous subsidies and a guarantee of 95 percent of the 
value of the loan. While extending the buyback program for another year 
will provide stability in the student lending market for the 2009-2010 
school year, it raises the question of how much Federal funding is too 
much when there is a cheaper alternative that offers the same Federal 
loans to students.
  That alternative is the direct loan program which issues the same 
federally guaranteed student loans without reliance on banks and 
lenders. In addition to cutting out the middleman, the direct loan 
program is far cheaper for the government to administer. According to 
the President's most recent budget, the cost to the taxpayer per loan 
through the direct loan program is $.77 compared to $5.25 through the 
FFEL program.
  Iowa State University, the University of Iowa, University of Northern 
Iowa, Kirkwood Community College, Des Moines Area Community College, 
and many other Iowa colleges, all issue loans through the direct loan 
program. I continue to hear from students and financial aid 
administrators at those schools that the program serves them well. An 
added benefit of the direct loan program is that in these troubled 
economic times students at direct loan schools receive their student 
loans without the worry of whether their lender will be there for them 
next year. Any college worried about loan availability for their 
students should immediately sign up for the direct loan program.
  But the problem is deeper than any one school or lender. As our 
economy continues to falter and the cost of college rises, we owe it to 
our young people and their parents to provide student aid that is 
reliable, efficient and comprehensive. The Federal student loan program 
is one of the best investments our country can make. It should be a 
priority to provide those loans in the most fiscally responsible way 
possible.

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