Magazine article American Banker

Bankers Laud Plan for Student Loans

Magazine article American Banker

Bankers Laud Plan for Student Loans

Article excerpt

WASHINGTON -- Bankers are applauding a new package of student loan program reform measures, hoping it will give them a better chance of competing with federal direct loan programs.

The Coalition for Student Loan Reform, a group of not-for-profit student loan guarantee and secondary markets agencies, announced the reform package Thursday.

The measures were created to standardize and simplify loan application procedures and streamline other loan procedures in the Federal Family Education Loan Program, or FFELP, through which private lenders make student loans that are backed by federal reinsurance.

"They aim at improving the FFELP so it can outperform the federal direct loan system," Consumer Bankers Association spokesman Fritz Elmendorf said. "The coalition has a number of measures that will help."

The loan reform coalition is recommending some aspects of its reform measures to the Department of Education, while other facets of the package will require legislation to set them in motion.

Test Run of Direct Lending

The Department of Education is engaged in a five-year test run of a direct-lending program in an effort to discover whether a government program can cater to the needs of students more efficiently than private lenders.

Under the Federal Direct Student Loan Program, the federal government borrows money to loan to students and services and collects the loans with federal contractors, largely cutting private lenders out of the picture.

"The Department of Education has done a good job so far," said coalition chairman Daniel S. …

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