DL v. FELP

OK, I will be the first to tell you that the complex world of financial aid is not often discussed on crazy talk radio or Irishmike's Blog. But there is a MAJOR fight relating to this issue that will have a real effect for colleges and universities.

Currently, schools have an option to which program they can participate: Federal Family Education Loan Program (which is basically government subsidized loans from private lenders to students) or FELP---and---Direct Lending (DL) where basically the Dept. of Education manages the loan (they bid that service out).

Today, legislation was filed to by House Education and Labor Chairman George Miller in which the federal government would stop providing subsidies to private lenders issuing loans under FELP and would roll over the entire program into DL. The bill would preserve the role of lenders as loan service providers but would require lenders to compete for the privilege on loans provided from the government.

Revenue collected from the change in lending practices would be put toward an estimated $40 billion expansion of the Pell grant program, with an additional $10 billion going toward deficit reduction. The bill also includes provisions sponsoring investments in community colleges, online training and early education.

Some lenders are fighting back. Some reps. and senators are fighting back. The Obama administration is pushing hard for DL. There are a lot of aspects to each position. So DC gets hotter!

At A&M, we've been aware that this was afoot (plus several lenders have been bailing out of the student loan business) and with the new student information system we could handle DL if it becomes law of the land. However, some schools are not in that position.....

Stay tuned!